It is Hobbes, not Rousseau : an experiment on social insurance
AbstractWe perform an experiment on social insurance to provide a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothing to redistribute. A solution to the repeated game allows for redistribution and high effort, by the threat to revert to the worst of these equilibria. Our results show that redistribution with high effort is not sustainable. The main reason for the absence of redistribution is that rich agents do not act differently depending on whether the poor have worked hard or not. There is no social contract by which redistribution may be sustained by the threat of punishing the poor if they do not exert effort. Thus, the explanation of the behavior of the subjects lies in Hobbes, not in Rousseau.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we071808.
Date of creation: Jun 2006
Date of revision:
Other versions of this item:
- Antonio Cabrales & Rosemarie Nagel & Jose V. Rodr?guez Mora, 2007. "It is Hobbes, not Rousseau: An Experiment on Social Insurance," Labsi Experimental Economics Laboratory University of Siena 019, University of Siena.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
- O - Economic Development, Technological Change, and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
- NEP-CBE-2007-04-14 (Cognitive & Behavioural Economics)
- NEP-CDM-2007-04-14 (Collective Decision-Making)
- NEP-EXP-2007-04-14 (Experimental Economics)
- NEP-HPE-2007-04-14 (History & Philosophy of Economics)
- NEP-IAS-2007-04-14 (Insurance Economics)
- NEP-POL-2007-04-14 (Positive Political Economics)
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