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Individual Responsibility and the Funding of Collective Goods

Author

Listed:
  • Lévy-Garboua, Louis

    () (TEAM, University of Paris 1)

  • Montmarquette, Claude

    () (University of Montreal)

  • Villeval, Marie Claire

    () (CNRS, GATE)

Abstract

When a deficit occurs in the funding of collective goods, it is usually covered by raising the amount of taxes or by rationing the supply of the goods. This article compares the efficiency of these institutions. We report the results of a 2x2 experiment based on a game in the first stage of which subjects can voluntarily contribute to the funding of a collective good that is being used to compensate the victims of a disaster. In the second stage of the game, in case of a deficit, we introduce either taxation or rationing. Each treatment is subjected to two conditions: the burden of the deficit is either uniform for all the subjects, or individualized according to the first-stage contribution. We show that the individualized treatments favor the provision of the collective good through voluntary cooperation whereas the uniform treatments encourage free-riding. Individualized taxation brings the voluntary contributions closer to the optimum while uniform rationing appears to be the worst system since free-riding restrains the provision of the good.

Suggested Citation

  • Lévy-Garboua, Louis & Montmarquette, Claude & Villeval, Marie Claire, 2007. "Individual Responsibility and the Funding of Collective Goods," IZA Discussion Papers 3041, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3041
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    References listed on IDEAS

    as
    1. Chan, Kenneth S. & Mestelman, Stuart & Muller, R. Andrew, 2008. "Voluntary Provision of Public Goods," Handbook of Experimental Economics Results, Elsevier.
    2. Sefton, Martin & Steinberg, Richard, 1996. "Reward structures in public good experiments," Journal of Public Economics, Elsevier, vol. 61(2), pages 263-287, August.
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    5. Roberts, Russell D, 1987. "Financing Public Goods," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 420-437, April.
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    More about this item

    Keywords

    responsibility; rationing; taxation; collective goods; interior optimum; experiment;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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