Abstract
This paper examines the political difficulty of enacting welfare-enhancing environmental taxes. Using referenda in a market experiment with externalities, we investigate the effect of trial periods on the acceptability of two theoretically equivalent Pigouvian tax schemes. While implementing either tax is in subjects’ material self-interest, we find significant levels of opposition to both schemes, though the level differs considerably. Results show that trial runs can overcome initial tax aversion, which is robust across schemes, but a trial with one scheme does not affect the acceptability of the other. Trial periods also mitigate initial biases in preferences of alternative tax schemes.
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