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Do people invest in local public goods with long-term benefits: Experimental evidence from a shanty town in Peru

Listed author(s):
  • De Hoop, Thomas
  • Van Kempen, Luuk
  • Fort, Ricardo

This paper discusses voluntary contributions to health education in a shanty town in Peru, using a new experimental setup to identify voluntary contributions to local public goods. The experiment enables individuals to contribute to a health education meeting facilitated by an NGO, which they know will only be organised if the cumulative investment level exceeds a certain threshold value. In contrast to expectations of aid distributors, individuals contributed a substantial amount of money, despite the long-term nature of the health benefits from health education. High discount rates only seem to have had a detrimental effect on investment in a poorer subsample. Results from a complementary experiment, which identifies donations to a nutrition program, suggest that positive beliefs about short-term benefits from health education in the form of learning effects have played an important role in the investment decision. The results indicate that channelling decision-making power about public good provision to beneficiaries not necessarily implies a crowding out of investment in local public goods with long-term benefits. Hence, particular attention is given to the potential role of cash transfers in the financing of local public goods.

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File URL: https://mpra.ub.uni-muenchen.de/24968/1/MPRA_paper_24968.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24968.

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Date of creation: Jul 2010
Handle: RePEc:pra:mprapa:24968
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