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Individual Responsibility and the Funding of Collective Goods

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  • Louis Lévy-Garboua

    ()
    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Claude Montmarquette

    (Université de Montréal - Département de Sciences Economique - Université de Montréal)

  • Marie Claire Villeval

    ()
    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, IZA - Institute for the study of labor - IZA - Institute for the Study of Labor)

Abstract

When a deficit occurs in the funding of collective goods, it is usually covered by raising the amount of taxes or by rationing the supply of the goods. This article compares the efficiency of these institutions. We report the results of a 2x2 experiment based on a game in the first stage of which subjects can voluntarily contribute to the funding of a collective good that is being used to compensate the victims of a disaster. In the second stage of the game, in case of a deficit, we introduce either taxation or rationing. Each treatment is subjected to two conditions: the burden of the deficit is either uniform for all the subjects, or individualized according to the first-stage contribution. We show that the individualized treatments favor the provision of the collective good through voluntary cooperation whereas the uniform treatments encourage free-riding. Individualized taxation brings the voluntary contributions closer to the optimum while uniform rationing appears to be the worst system since free-riding restrains the provision of the good.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00175065.

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Date of creation: Sep 2007
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Handle: RePEc:hal:cesptp:halshs-00175065

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Keywords: collective goods; taxation; rationing; responsibility; interior optimum; experiment;

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  1. Georg KIRCHSTEIGER & Clemens PUPPE, 1996. "On the Possibility of Efficient Private Provision of Public Goods through Government Subsidies," Vienna Economics Papers, University of Vienna, Department of Economics vie9608, University of Vienna, Department of Economics.
  2. Kenneth S. Chan & Stuart Mestelman & R. Andrew Muller, 1998. "Voluntary Provision of Public Goods," McMaster Experimental Economics Laboratory Publications, McMaster University 1998-02, McMaster University.
  3. Roberts, Russell D, 1987. "Financing Public Goods," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(2), pages 420-37, April.
  4. Marc WILLINGER & Anthony ZIEGELMEYER, 1999. "Framing and cooperation in public good games: an experiment with an interior solution," Working Papers of BETA 9901, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Roberto Burlando & Francesco Guala, 2005. "Heterogeneous Agents in Public Goods Experiments," Experimental Economics, Springer, Springer, vol. 8(1), pages 35-54, April.
  6. Andreoni, James, 1993. "An Experimental Test of the Public-Goods Crowding-Out Hypothesis," American Economic Review, American Economic Association, American Economic Association, vol. 83(5), pages 1317-27, December.
  7. Goeree, Jacob K. & Holt, Charles A. & Laury, Susan K., 2002. "Private costs and public benefits: unraveling the effects of altruism and noisy behavior," Journal of Public Economics, Elsevier, Elsevier, vol. 83(2), pages 255-276, February.
  8. Tatsuyoshi Saijo & Hideki Nakamura, 2001. "The 'Spite' Dilemma in Voluntary Contribution Mechanism Experiments," Levine's Working Paper Archive 563824000000000155, David K. Levine.
  9. Dawes, Robyn M & Thaler, Richard H, 1988. "Anomalies: Cooperation," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 2(3), pages 187-97, Summer.
  10. Kenneth Chan & Stuart Mestelman & Robert Moir & R. Muller, 1999. "Heterogeneity and the Voluntary Provision of Public Goods," Experimental Economics, Springer, Springer, vol. 2(1), pages 5-30, August.
  11. Keser, Claudia, 1996. "Voluntary contributions to a public good when partial contribution is a dominant strategy," Economics Letters, Elsevier, Elsevier, vol. 50(3), pages 359-366, March.
  12. Sefton, Martin & Steinberg, Richard, 1996. "Reward structures in public good experiments," Journal of Public Economics, Elsevier, Elsevier, vol. 61(2), pages 263-287, August.
  13. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, Elsevier, vol. 29(1), pages 25-49, February.
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