Regulation of morally responsible agents with motivation crowding

Joachim Fuenfgelt () and Stefan Baumgaertner ()
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Joachim Fuenfgelt: Sustainability Economics Group, Leuphana University of Lueneburg, Germany
Stefan Baumgaertner: Department of Sustainability Sciences and Department of Economics, Leuphana University of Lueneburg, Germany
Authors registered in the RePEc Author Service: Stefan Baumgärtner

No 241, Working Paper Series in Economics from University of Lüneburg, Institute of Economics

Abstract: We study the regulation of a morally responsible agent in the context of a negative consumption externality and motivation crowding. In particular, we analyze how various governmental interventions affect the agent’s motivation to assume moral responsibility. Employing a motivation-crowding model, we find that morally motivated behavior will, in general, not ensure Pareto efficiency without intervention. A Pigouvian tax may be efficient under motivation crowding. But the efficient taxe rate needs to be higher, which may lead to a full crowding-out of moral motivation. By contrast, an inefficiently low taxe rate may increase the market failure due to motivation crowding. Provision of information is efficient only in very specific cases but may be effective in reducing the extent of market failure. A complementary tax-and-information policy approach is superior to a tax as single instrument if its aim is to reduce consumption and if provision of information raises moral motivation.

Keywords: Altruism; externality; moral motivation; motivation crowding; Pareto efficiency; regulation; responsibility; taxes; provision of information (search for similar items in EconPapers)
JEL-codes: D03 D11 D62 H23 Q58 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-06
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