Advanced Search
MyIDEAS: Login to save this paper or follow this series

Are tax-financed contributions to a public good completely crowded-out? Experimental evidence

Contents:

Author Info

  • Timothy J. Gronberg

    (Department of Economics, Texas A&M University)

  • R. Andrew Luccasen

    (Mississippi University for Women)

  • Theodore L. Turocy

    ()
    (School of Economics and CBESS, University of East Anglia)

  • John B. Van Huyck

    (Department of Economics, Texas A&M University)

Abstract

We report the results of a laboratory experiment on crowd-out in a voluntary contribution mechanism public goods game. In our setting, a standard argument states that a tax should not be effective in raising contributions, because agents respond by reducing voluntary contributions by the amount of the tax. Our experimental design focuses in on this intuition by abstracting away from several potential confounds. We use a specification for the payoff function in which there is a dominant strategy for own-earnings maximizing agents, located interior to and in the upper half of the strategy space. The dominant strategy ensures that changes in contributions are attributable to the tax directly, rather than second-order effects due to responses to out-of-equilibrium play by other agents. The dominant strategy is made more transparent by the use of a novel graphical decision interface. We find that individuals robustly choose at or above the own-earnings dominant strategy level. Even with the controls of the design, crowd-out is incomplete, but the degree of crowd-out is higher than in previous studies. Analysis of individual-level decisions provides evidence of different player types. Behavior of subjects not choosing the dominant or Pareto-efficient contributions is well-organized by a model of warm-glow giving with a logit decision error.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.uea.ac.uk/documents/166500/0/CBESS-12-02x.pdf
File Function: main text
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) with number 12-02.

as in new window
Length:
Date of creation: 15 Feb 2012
Date of revision:
Handle: RePEc:uea:wcbess:12-02

Contact details of provider:
Postal: Norwich NR4 7TI
Phone: 44 1603 591131
Fax: +44(0)1603 4562592
Web page: http://www.uea.ac.uk/eco/
More information through EDIRC

Order Information:
Postal: Helen Chapman, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK
Email:

Related research

Keywords: Public goods; crowd-out; warm-glow; logit choice;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ahn, T.K. & Isaac, R. Mark & Salmon, Timothy C., 2009. "Coming and going: Experiments on endogenous group sizes for excludable public goods," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 336-351, February.
  2. Kenneth S. Chan & Robert Godby & Stuart Mestelman & R. Andrew Muller, 1998. "Crowding Out Voluntary Contributions to Public Goods," McMaster Experimental Economics Laboratory Publications, McMaster University 1998-01, McMaster University.
  3. 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.
  4. Warr, Peter G., 1982. "Pareto optimal redistribution and private charity," Journal of Public Economics, Elsevier, vol. 19(1), pages 131-138, October.
  5. Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
  6. Hungerman, Daniel M., 2009. "Crowd-out and diversity," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 729-740, June.
  7. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  8. Sonia Manzoor & John Straub, 2005. "The robustness of Kingma’s crowd-out estimate: Evidence from new data on contributions to public radio," Public Choice, Springer, Springer, vol. 123(3), pages 463-476, June.
  9. James Andreoni & A. Abigail Payne, 2010. "Is Crowding Out Due Entirely to Fundraising? Evidence from a Panel of Charities," Department of Economics Working Papers 2010-08, McMaster University.
  10. John A. List & David Lucking-Reiley, 2000. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Vanderbilt University Department of Economics Working Papers 0008, Vanderbilt University Department of Economics.
  11. Richard Ashley & Sheryl Ball & Catherine Eckel, 2010. "Motives for Giving: A Reanalysis of Two Classic Public Goods Experiments," Southern Economic Journal, Southern Economic Association, vol. 77(1), pages 15-26, July.
  12. R. Isaac & James Walker, 1998. "Nash as an Organizing Principle in the Voluntary Provision of Public Goods: Experimental Evidence," Experimental Economics, Springer, Springer, vol. 1(3), pages 191-206, December.
  13. David C. Ribar & Mark O. Wilhelm, 2002. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(2), pages 425-457, April.
  14. Urs Fischbacher & Simon Gaechter & Ernst Fehr, . "Are People Conditionally Cooperative? Evidence from a Public Goods Experiment," IEW - Working Papers 016, Institute for Empirical Research in Economics - University of Zurich.
  15. Richard STEINBERG, 1991. "Does Government Spending Crowd Out Donations?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 62(4), pages 591-612, October.
  16. repec:att:wimass:9006 is not listed on IDEAS
  17. 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.
  18. Daniel Houser & Robert Kurzban, 2002. "Revisiting Kindness and Confusion in Public Goods Experiments," American Economic Review, American Economic Association, vol. 92(4), pages 1062-1069, September.
  19. Holt, Charles A. & Laury, Susan K., 2008. "Theoretical Explanations of Treatment Effects in Voluntary Contributions Experiments," Handbook of Experimental Economics Results, Elsevier, Elsevier.
  20. Jen Shang & Rachel Croson, 2009. "A Field Experiment in Charitable Contribution: The Impact of Social Information on the Voluntary Provision of Public Goods," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(540), pages 1422-1439, October.
  21. 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.
  22. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, vol. 35(1), pages 57-73, February.
  23. Eckel, Catherine C. & Grossman, Philip J. & Johnston, Rachel M., 2005. "An experimental test of the crowding out hypothesis," Journal of Public Economics, Elsevier, vol. 89(8), pages 1543-1560, August.
  24. Sefton, Martin & Steinberg, Richard, 1996. "Reward structures in public good experiments," Journal of Public Economics, Elsevier, vol. 61(2), pages 263-287, August.
  25. repec:att:wimass:9309 is not listed on IDEAS
  26. Seely, Beth & Van Huyck, John & Battalio, Raymond, 2005. "Credible assignments can improve efficiency in laboratory public goods games," Journal of Public Economics, Elsevier, vol. 89(8), pages 1437-1455, August.
  27. T. K. Ahn & R. Mark Isaac & Timothy C. Salmon, 2008. "Endogenous Group Formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 171-194, 04.
  28. Bardsley, Nicholas & Sausgruber, Rupert, 2005. "Conformity and reciprocity in public good provision," Journal of Economic Psychology, Elsevier, Elsevier, vol. 26(5), pages 664-681, October.
  29. Andreoni, James, 1993. "An Experimental Test of the Public-Goods Crowding-Out Hypothesis," American Economic Review, American Economic Association, vol. 83(5), pages 1317-27, December.
  30. Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
  31. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, Springer, vol. 1(1), pages 61-99, March.
  32. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Alpízar, Francisco & Martinsson, Peter & Nordén, Anna, 2014. "Do Entrance Fees Crowd Out Donations for Public Goods? Evidence from a Protected Area in Costa Rica," Discussion Papers, Resources For the Future dp-14-10-efd, Resources For the Future.
  2. Lim, Wooyoung & Matros, Alexander & Turocy, Theodore L., 2014. "Bounded rationality and group size in Tullock contests: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 155-167.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:uea:wcbess:12-02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alasdair Brown).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.