All Title Author
Keywords Abstract


Fairness Norms and the Incidence of Environmental Subsidy

DOI: 10.4236/me.2012.36100, PP. 786-792

Keywords: Environmental Economics, Fairness, Social Norms, Subsidy, Tax Equivalence Theorem

Full-Text   Cite this paper   Add to My Lib

Abstract:

Although fairness concerns are frequently discussed in the real world environmental politics, their effects are relatively neglected in the environmental economics literature. Using a survey method, this paper attempts to reveal how fairness norms affect the incidence of subsidy both in the short-run and long-run. The results indicate that statutory incidence (legal right to receive subsidy) affects people’s fairness norms on who should receive subsidy. In particular it is considered unfair for a firm to receive a part of the subsidy when it is legally granted to the consumer side. If firms avoid behaviors that are considered unfair, the tax and subsidy equivalence theorem may not hold under this situation. The survey results also reveal that fairness norms affect the incidence of subsidy in the long-run, in a sense that the allocation of gains that are generated due to subsidy is affected. People find it fair if allocation is made in proportion to firms’ own effort. Therefore, if an increase in profit is achieved by activities directly supported by subsidy, people find it less justifiable for firms to keep all the gains by themselves and thus firms may be forced to share the gains with consumers.

References

[1]  O. Johansson-Stenman and J. Konow, “Fair Air: Distributive Justice and Environmental Economics,” Environmental and Resource Economics, Vol. 46, No. 2, 2010, pp. 147-166. doi:10.1007/s10640-010-9356-7
[2]  T. Nelson, P. Simshauser and S. Kelley, “Australian Residential Solar Feed-In Tariffs: Industry Stimulus or Regressive Form of Taxation?” Economic Analysis & Policy, Vol. 41, No. 2, 2011, pp. 113-129.
[3]  U. Wang, “Germany’s Solar Identity Crisis,” 2012. http://www.renewableenergyworld.com/rea/news/article/2012/01/germanys-solar-identity-crisis
[4]  B. Ruffle, “Tax and Subsidy Incidence Equivalence Theo- ries: Experimental Evidence from Competitive Markets,” Journal of Public Economics, Vol. 89, No. 8, 2005, pp. 1519-1542. doi:10.1016/j.jpubeco.2004.04.009
[5]  R. Kerschbamer and G. Kirchsteiger, “Theoretically Robust but Empirically Invalid? An Experimental Investigation into Tax Equivalence,” Economic Theory, Vol. 16, No. 3, 2000, pp. 719-734.
[6]  B. Siers, “An Introduction to Organizational Fairness,” 2004. http://www.chsbs.cmich.edu/leader_model/Development/media/Targeted%20Lessons/organizational_fairness.htm
[7]  C. F. Camerer, “Behavioral Game Theory: Experiments in Strategic Interaction,” Princeton University Press, Prin- ceton, 2003.
[8]  M. A. Nowak, K. M. Page and K. Sigmund, “Fairness versus Reason in the Ultimatum Game,” Science, Vol. 289, No. 5485, 2000, pp. 1773-1775. doi:10.1126/science.289.5485.1773
[9]  E. Fehr and S. Gachter, “Cooperation and Punishment in Public Goods Experiments,” American Economic Review, Vol. 90, No. 4, 2000, pp. 980-994. doi:10.1257/aer.90.4.980
[10]  D. Kahneman, J. L. Knetsch and R. Thaler, “Fairness as a Constraint on Profit Seeking: Entitlements in the Market,” American Economic Review, Vol. 76, No. 4, 1986, pp. 728-741.
[11]  C. M. Fleming and M. Bowden, “Web-Based Surveys as an Alternative to Traditional Mail Methods,” Journal of Environmental Management, Vol. 90, No. 1, 2009, pp. 284-292. doi:10.1016/j.jenvman.2007.09.011
[12]  S. B. Olsen, “Choosing between Internet and Mail Survey Modes for Choice Experiment Surveys Considering Non-Market Goods,” Environmental and Resource Economics, Vol. 44, No. 4, 2009, pp. 591-610. doi:10.1007/s10640-009-9303-7
[13]  R. Chetty, A. Looney and K. Kroft, “Salience and Taxation: Theory and Evidence,” American Economic Review, Vol. 99, No. 4, 2009, pp. 1145-1177. doi:10.1257/aer.99.4.1145
[14]  M. Busse, J. Silva-Risso and F. Zettelmeyer, “$1000 Cash Back: The Pass-Through of Auto Manufacturer Promotions,” American Economic Review, Vol. 96, No. 4, 2006, pp. 1253-1270. doi:10.1257/aer.96.4.1253
[15]  J. Konow, “A Positive Theory of Economic Fairnesss,” Journal of Economic Behavior and Organization, Vol. 31, No. 1, 1996, pp. 13-35. doi:10.1016/S0167-2681(96)00862-1
[16]  S. Levitt and J. List, “What Do Laboratory Experiments Measuring Social Preferences Reveal about the Real World?” Journal of Economic Perspectives, Vol. 21, No. 2, 2007, pp. 153-174. doi:10.1257/jep.21.2.153

Full-Text

comments powered by Disqus

Contact Us

service@oalib.com

QQ:3279437679

微信:OALib Journal