Provision of public goods: Unconditional and conditional donations from outsiders

Public goods often provide external benefits to individuals beyond those who actively provide the goods. This paper addresses institutional arrangements between subjects who can provide a public good (insiders) and subjects who also benefit from the public good but cannot provide it (outsiders) due to technical, physical or institutional reasons. Using laboratory experiments, we compare a setting of passive outsiders to situations where outsiders can either make unconditional or conditional transfers to the group of insiders, in environments where transfers are shared equally among insiders. The primary behavioral questions are to what extent outsiders will use the opportunity to subsidize the contributions of insiders and how insiders will respond to those subsidies. In summary, outsiders make transfers to insiders, but reciprocal increases in contributions by insiders to transfers are small. Both transfers and contributions decay over time. Indeed, contributions to the public good with transfer institutions are no greater than those without such institutions.