Hintermann, Beat and Rutherford, Thomas F.. (2016) Social planning and coercion under bounded rationality with an application to environmental policy. International tax and public finance. pp. 1-25.
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Official URL: http://edoc.unibas.ch/44809/
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Abstract
We develop a theory of social planning with a concern for economic coercion, which we define as the difference between consumers' actual utility, and the "counterfactual" utility they expect to obtain if they were able to set policy themselves. Reasons to limit economic coercion include protecting minorities, preventing disenfranchised groups from engaging in socially costly behavior, or political economy considerations. If consumers are fully rational, we show that limiting coercion is equivalent to placing more welfare weight on coerced consumers at the expense of others. If, however, consumers' rationality is bounded, counterfactual utility becomes endogenous to current policy, and the welfare loss associated with limiting coercion increases. We set up a numerical version of our model and find that the bias-related welfare loss can be substantial.
Faculties and Departments: | 06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Public Economics / Public Finance (Hintermann) |
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UniBasel Contributors: | Hintermann, Beat |
Item Type: | Article, refereed |
Article Subtype: | Research Article |
Publisher: | Springer |
ISSN: | 0927-5940 |
e-ISSN: | 1573-6970 |
Note: | Publication type according to Uni Basel Research Database: Journal article |
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Identification Number: | |
Last Modified: | 16 Dec 2016 09:45 |
Deposited On: | 16 Dec 2016 09:45 |
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