Tax or green nudge? An experimental analysis of pesticide policies in Germany

Pesticides are one of the most important inputs in modern agriculture. However, intensive use of pesticides is also related to adverse effects on the environment and human health. While implementation of pesticide taxes with the intent to reduce pesticide applications has been widely discussed, green nudges are considered as innovative policy tools to foster environmental friendly behaviour. To date, little is known about the effects of these policy tools at the farm level. With this in mind, we use a business management game to investigate how a pesticide tax and a green nudge affect crop, tillage and pesticide decisions for a "virtual" farm. Results from a sample of German agricultural students reveal that both policies are able to reduce the amount of pesticides applied. However, implementation of the pesticide tax also involves a substantial profit loss. Unlike in the green nudge treatment, participants under pesticide tax adjust their cropping and tillage strategies which could involve unintended ecological effects.