Financing of Public Goods through Taxation in a General Equilibrium Economy: Experimental Evidence
We compare laboratory general equilibrium economies in which maintenance of a depreciating public facility is financed either by anonymous voluntary contributions or taxes. Agents individually allocate their private goods between consumption and investment in production. The experimental economies sustain public goods at 80-90 percent of the infinite horizon but 25-30 percent above the finite horizon optimum. Payoff efficiency is around 90 percent. This contrasts with rapid decline of public goods under voluntary contributions. When subjects have the choice between a system with voluntary contributions or taxation, 23 out of 24 voting decisions favor taxation. Taxation appears to be superior on grounds of both long run efficiency and fairness. Economy is too complex for subjects to solve for optimally, but simple institutional constraints yield aggregate efficiency.
|Date of creation:||Oct 2011|
|Date of revision:||Apr 2013|
|Contact details of provider:|| Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA|
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.yale.edu/
More information through EDIRC
|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
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.:
- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
- Ernst Fehr & Joseph Henrich & Robert Boyd, 2003.
"In Search of Homo Economicus: Behavioral Experiments in 15 Small- Scale Societies,"
- Joseph Henrich, 2001. "In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies," American Economic Review, American Economic Association, vol. 91(2), pages 73-78, May.
- J. Geanakoplos & I. Karatzas & M. Shubik & W. Sudderth, 1999.
"A Strategic Market Game with Active Bankruptcy,"
99-04-025, Santa Fe Institute.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-20, April.
- Patrick Kehoe & Varadarajan V. Chari, 2006.
"Modern Macroeconomics in Practice: How Theory is Shaping Policy,"
NBER Working Papers
12476, National Bureau of Economic Research, Inc.
- V. V. Chari & Patrick J. Kehoe, 2006. "Modern Macroeconomics in Practice: How Theory Is Shaping Policy," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 3-28, Fall.
- V. V. Chari & Patrick J. Kehoe, 2006. "Modern macroeconomics in practice: how theory is shaping policy," Staff Report 376, Federal Reserve Bank of Minneapolis.
- Anna Gunnthorsdottir & Daniel Houser & Kevin McCabe & Holly Ameden, 2004.
"Disposition, History and Contributions in Public Goods Experiments,"
- Gunnthorsdottir, Anna & Houser, Daniel & McCabe, Kevin, 2007. "Disposition, history and contributions in public goods experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 304-315, February.
- I. Karatzas & M. Shubik & W. Sudderth, 2006. "Production, interest, and saving in deterministic economies with additive endowments," Economic Theory, Springer, vol. 29(3), pages 525-548, November.
- Walker, James M, et al, 2000. "Collective Choice in the Commons: Experimental Results on Proposed Allocation Rules and Votes," Economic Journal, Royal Economic Society, vol. 110(460), pages 212-34, January.
- Palfrey, Thomas R & Prisbrey, Jeffrey E, 1997. "Anomalous Behavior in Public Goods Experiments: How Much and Why?," American Economic Review, American Economic Association, vol. 87(5), pages 829-46, December.
- Stephan Kroll & Todd L. Cherry & Jason F. Shogren, 2007. "Voting, Punishment, And Public Goods," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 557-570, 07.
- Ioannis Karatzas & Martin Shubik & William Sudderth & John Geanakoplos, 2006. "The inflationary bias of real uncertainty and the harmonic Fisher equation," Economic Theory, Springer, vol. 28(3), pages 481-512, 08.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Ioannis Karatzas & Martin Shubik & William D. Sudderth, 2011. "Financial Control of a Competitive Economy with Public Goods but Without Randomness," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(4), pages 503-537, 08.
- Panos Hatzipanayotou & Michael S. Michael, 2001. "Public Goods, Tax Policies, and Unemployment in LDCs," Southern Economic Journal, Southern Economic Association, vol. 68(1), pages 107-119, July.
When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:1830r. 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: (Glena Ames)
If references are entirely missing, you can add them using this form.