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Steffen Kallbekken, Stephan Kroll and Todd L Cherry
''Pigouvian tax aversion and inequity aversion in the lab''
( 2010, Vol. 30 No.3 )
We use an experimental market with externalities to test whether inequality aversion could help explain the popularity of earmarking tax revenues. We find that voter opposition is not fully explained by material self-interest: Results indicate that preferences for fairness influence voting behavior, with greater inequality in tax revenue distribution negatively affecting the acceptability of the tax. In addition to this, we also discover a significant degree of tax-aversion in the votes. Our findings provide greater understanding of the behavioral underpinnings of the positive impact that earmarking has on the acceptability of Pigouvian taxes.
Keywords: Pigouvian taxes, public acceptability, earmarking, fairness, inequity aversion, laboratory experiments
JEL: H2 - Taxation, Subsidies, and Revenue: General
C9 - Design of Experiments: General
Manuscript Received : Jun 04 2010 Manuscript Accepted : Jul 20 2010

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