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Income Redistribution and Public Good Provision: an Experiment

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  • Jonathan Maurice
  • Marc Willinger
  • Agathe Rouaix

Abstract

We provide a new experimental investigation of the neutrality theorem of Warr (1983), who states ”when a single public good is provided at positive levels by private individuals, its provision is unaffected by a redistribution of income”. Instead of comparing different income distributions across groups as Chan et al. (1996), in our experiment the total group endowment is redistributed after a 10 rounds sequence. We compare an unequalizing redistribution (EI) and an equalizing redistribution (IE), to two benchmark treatments for which the 10 rounds sequence is repeated, either with an equal distribution (EE) or an unequal distribution (II). The constituent game has a unique interior dominant strategy equilibrium. Our data support the neutrality theorem (after controlling for the restart effect): redistribution has no effect on the total amount of public good in none of the tested treatments. However, the analysis of individual behavior shows that ”poor” subjects over-contribute with respect to their Nash-contribution, while ”rich” subjects tend to play their Nash-contribution or under-contribute slightly. Furthermore, after a redistribution, subjects react asymetrically: subjects who get poorer reduce their contribution of a larger amount than the amount of contribution added by subjects who become richer. And it is shown that the latter do not react enough to the redistribution.

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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 09-12.

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Length: 44 pages
Date of creation: Nov 2009
Date of revision: Jun 2011
Handle: RePEc:lam:wpaper:09-12

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  1. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  2. Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
  3. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
  4. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 1998. "A theoretical analysis of altruism and decision error in public goods games," Journal of Public Economics, Elsevier, vol. 70(2), pages 297-323, November.
  5. Andereoni, J., 1988. "Why Free Ride? Strategies And Learning In Public Goods Experiments," Working papers 375, Wisconsin Madison - Social Systems.
  6. Sefton, Martin & Steinberg, Richard, 1996. "Reward structures in public good experiments," Journal of Public Economics, Elsevier, vol. 61(2), pages 263-287, August.
  7. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
  8. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  9. Laury, Susan K & Walker, James M & Williams, Arlington W, 1999. " The Voluntary Provision of a Pure Public Good with Diminishing Marginal Returns," Public Choice, Springer, vol. 99(1-2), pages 139-60, April.
  10. Keser, Claudia, 1996. "Voluntary contributions to a public good when partial contribution is a dominant strategy," Economics Letters, Elsevier, vol. 50(3), pages 359-366, March.
  11. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  12. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
  13. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
  14. Chan, Kenneth S. & Mestelman, Stuart & Muller, R. Andrew, 2008. "Voluntary Provision of Public Goods," Handbook of Experimental Economics Results, Elsevier.
  15. Marc Willinger & Anthony Ziegelmeyer, 2001. "Strength of the Social Dilemma in a Public Goods Experiment: An Exploration of the Error Hypothesis," Experimental Economics, Springer, vol. 4(2), pages 131-144, October.
  16. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
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Cited by:
  1. Kamei, Kenju, 2014. "Promoting Competition or Helping Less-Endowed? An Experiment on Collective Institutional Choices under Intra-Group Inequality," MPRA Paper 56774, University Library of Munich, Germany.
  2. Agathe Rouaix & Charles Figuières & Marc Willinger, 2013. "The trade-off between welfare and equality in a public good experiment," Working Papers 13-03, LAMETA, Universtiy of Montpellier, revised Feb 2013.

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