TY  - BOOK
AU  - Allcott,Hunt
AU  - Cohen,Daniel
AU  - Morrison,William
AU  - Taubinsky,Dmitry
ED  - National Bureau of Economic Research.
TI  - When do "Nudges" Increase Welfare?
T2  - NBER working paper series
PY  - 2022///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
KW  - General
KW  - jelc
N1  - December 2022; Hardcopy version available to institutional subscribers
N2  - Policymakers are increasingly interested in non-standard policy instruments (NPIs), or "nudges," such as simplified information disclosure and warning labels. We characterize the welfare effects of NPIs using public finance sufficient statistic approaches, allowing for endogenous prices, market power, and optimal or suboptimal taxes. While many empirical evaluations have focused on whether NPIs increase ostensibly beneficial behaviors on average, we show that this can be a poor guide to welfare. Welfare also depends on whether the NPI reduces the variance of distortions from heterogenous biases and externalities, and the average effect becomes irrelevant with zero pass-through or optimal taxes. We apply our framework to randomized experiments evaluating automotive fuel economy labels and sugary drink health labels. In both experiments, the labels increase ostensibly beneficial behaviors but also may decrease welfare in our model, because they increase the variance of distortions
UR  - https://www.nber.org/papers/w30740
UR  - http://dx.doi.org/10.3386/w30740
ER  -