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Growth and inequality in public good provision

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  • Gächter, Simon
  • Mengel, Friederike
  • Tsakas, Elias
  • Vostroknutov, Alexander

Abstract

In a novel experimental design, we study public good games with dynamic interdependencies, where each agent's wealth at the end of period t serves as her endowment in t+1. In this setting, growth and inequality arise endogenously allowing us to address new questions regarding their interplay and effect on cooperation. We find that amounts contributed are increasing over time even in the absence of punishment possibilities. Variation in wealth is substantial with the richest groups earning more than ten times what the poorest groups earn. Introducing the possibility of punishment does not increase wealth and in some cases even decreases it. In the presence of a punishment option, inequality in early periods is strongly negatively correlated with group income in later periods, highlighting negative interaction effects between endogenous inequality and punishment.

Suggested Citation

  • Gächter, Simon & Mengel, Friederike & Tsakas, Elias & Vostroknutov, Alexander, 2017. "Growth and inequality in public good provision," Journal of Public Economics, Elsevier, vol. 150(C), pages 1-13.
  • Handle: RePEc:eee:pubeco:v:150:y:2017:i:c:p:1-13
    DOI: 10.1016/j.jpubeco.2017.03.002
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    3. Milena Tsvetkova & Claudia Wagner & Andrew Mao, 2018. "The emergence of inequality in social groups: Network structure and institutions affect the distribution of earnings in cooperation games," PLOS ONE, Public Library of Science, vol. 13(7), pages 1-16, July.
    4. Chugunova, Marina & Luhan, Wolfgang J. & Nicklisch, Andreas, 2020. "When to leave carrots for sticks: On the evolution of sanctioning institutions in open communities," Economics Letters, Elsevier, vol. 191(C).
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    6. Jouxtel, Justine, 2019. "Voluntary contributions of time: Time-based incentives in a linear public goods game," Journal of Economic Psychology, Elsevier, vol. 75(PA).
    7. Billinger, Stephan & Rosenbaum, Stephen Mark, 2019. "Discretionary mechanisms and cooperation in hierarchies: An experimental study," Journal of Economic Psychology, Elsevier, vol. 74(C).

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