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Will Green Taxes Undermine Moral Motivation

PFM, Vol. 10 No. 2, (2010)

Both psychologists and economists have shown that under certain circumstances, economic incentives seem to undermine intrinsic or moral motivation. If such crowding-out effects are sufficiently strong, the effect of green taxes might even be counterproductive and increase, rather than decrease, environmental problems. However, moral motivation can also be reinforced by economic incentives, a fact which has received surprisingly little attention in the literature. In particular, reciprocal preferences and conditional cooperation may cause green taxes to support, rather than undermine, individuals’ moral motivation to contribute to a better environment.

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