Judging Nudging: Understanding the Welfare Effects of Nudges Versus Taxes / John A. List, Matthias Rodemeier, Sutanuka Roy, Gregory K. Sun.

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List, John A

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31152.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: While behavioral non-price interventions ("nudges") have grown from academic curiosity to a bona fide policy tool, their relative economic efficiency remains under-researched. We develop a unified framework to estimate welfare effects of both nudges and taxes, while allowing for normative ambiguity about how nudges map into utility. We showcase our approach by creating a database of more than 300 carefully hand-coded point estimates of non-price and price interventions in the markets for cigarettes, influenza vaccinations, and household energy. While nudges are effective in changing behavior in all three markets, they are not necessarily the most efficient policy. When nudges are debiasing, they are more efficient in the market for cigarettes, while taxes are more efficient in the vaccine and energy market. Interestingly, these conclusions also often hold when nudges are deceptive rather than debiasing. We identify two key factors that govern the difference in results across markets: i) an elasticity-weighted standard deviation of the behavioral bias, and ii) the magnitude of the average externality. Nudges dominate taxes whenever i) exceeds ii). Finally, we consider cases in which nudges cause direct psychic costs or benefits to consumers.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31152 (Browse shelf(Opens below))	Not For Loan

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April 2023.

While behavioral non-price interventions ("nudges") have grown from academic curiosity to a bona fide policy tool, their relative economic efficiency remains under-researched. We develop a unified framework to estimate welfare effects of both nudges and taxes, while allowing for normative ambiguity about how nudges map into utility. We showcase our approach by creating a database of more than 300 carefully hand-coded point estimates of non-price and price interventions in the markets for cigarettes, influenza vaccinations, and household energy. While nudges are effective in changing behavior in all three markets, they are not necessarily the most efficient policy. When nudges are debiasing, they are more efficient in the market for cigarettes, while taxes are more efficient in the vaccine and energy market. Interestingly, these conclusions also often hold when nudges are deceptive rather than debiasing. We identify two key factors that govern the difference in results across markets: i) an elasticity-weighted standard deviation of the behavioral bias, and ii) the magnitude of the average externality. Nudges dominate taxes whenever i) exceeds ii). Finally, we consider cases in which nudges cause direct psychic costs or benefits to consumers.