The ambient tax is often considered as an efficient instrument to achieve a first best outcome of ambient pollution when the regulator is less informed than the polluters. Since the ambient tax was never implemented in the fi eld, empirical evidence is missing. Available experimental fi ndings provide mixed evidence: efficiency is higher under external damage, i.e. if ambient pollution affects non-polluters (Spraggon, 2002, 2003) than under internal damage, i.e. if ambient pollution affects polluters themselves (Cochard et al., 2005). Since these two types of experiments relied on very different designs, it is worthwhile to compare them under a common experimental design. Our main fi nding is that the ambient tax is equally efficient under external damage than under internal damage.
Performance of the ambient tax: does the nature of the damage matter?
14 January 2014