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Rent extraction and prosocial behavior

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  • Cagala, Tobias
  • Glogowsky, Ulrich
  • Grimm, Veronika
  • Rincke, Johannes
  • Tuset-Cueva, Amanda

Abstract

We present controlled experimental evidence on how rent extraction by an administrator affects giving to non-profit associations. Holding the price of giving constant, we compare contributions between two conditions: a rent extraction condition, in which an administrator can expropriate a part of the contributions and a control condition without rent extraction. We find that rent extraction strongly reduces average contributions. Studying the channels through which this effect operates, we demonstrate that rent extraction has situational spillovers, suggesting that it undermines the contributors’ general preference for giving. In contrast, we do not find evidence for negative reciprocity towards the administrator.

Suggested Citation

  • Cagala, Tobias & Glogowsky, Ulrich & Grimm, Veronika & Rincke, Johannes & Tuset-Cueva, Amanda, 2019. "Rent extraction and prosocial behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 709-723.
  • Handle: RePEc:eee:jeborg:v:166:y:2019:i:c:p:709-723
    DOI: 10.1016/j.jebo.2019.08.008
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    1. Thomas Markussen & Smriti Sharma & Saurabh Singhal & Finn Tarp, 2020. "Inequality, institutions, and cooperation," WIDER Working Paper Series wp-2020-127, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Rent extraction; Donations; Prosocial behavior;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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