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Motivation crowding‐out and green‐paradox‐like outcomes

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  • Simone Marsiglio
  • Marco Tolotti
Abstract
We analyze the effectiveness of environmental policy in a framework in which households’ utility is determined by both private and social components, representing their extrinsic and intrinsic motivations to undertake green actions, respectively. Environmental policy, in the form of a subsidy aiming to incentivize the adoption of a green technology, on the one hand, directly increases households’ extrinsic motivation, while, on the other hand, indirectly decreases their intrinsic motivation. We show that, provided that the indirect effect dominates, the policy leads to crowding‐out of intrinsic motivation which ultimately undermines the effectiveness of the policy itself. Specifically, despite its positive effect on environmental outcomes in the short run, the policy will lead to a deterioration in long‐run environmental outcomes, giving rise to a reverse green‐paradox‐like outcome. Moreover, even in the case in which the direct effect dominates, provided that the indirect effect is large enough, the policy will generate a deterioration in short‐run environmental outcomes. These results clearly suggest that the optimal design of environmental policy is particularly complicated since it requires to take into account also its effects on intrinsic motivation.

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  • Simone Marsiglio & Marco Tolotti, 2020. "Motivation crowding‐out and green‐paradox‐like outcomes," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1559-1583, September.
    • Handle: RePEc:bla:jpbect:v:22:y:2020:i:5:p:1559-1583
    DOI: 10.1111/jpet.12444
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    References listed on IDEAS

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    1. Christos Constantatos & Christos Pargianas & Eftichios S. Sartzetakis, 2021. "Green consumers and environmental policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(1), pages 105-140, February.

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