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Why are heterogeneous communities inefficient? Theory, history and an experiment

Listed author(s):
  • David Hugh-Jones

    (University of East Anglia)

  • Carlo Perroni

    (University of Warwick)

We examine why heterogeneous communities may fail to provide public goods. Current work characterizes sanctioning free-riders as an undersupplied public good. We argue that often free-riders can be punished by the coordinated action of a group. This punishment can be profitable, and need not be undersupplied. But the power to expropriate defectors can also be used to expropriate outgroups. Heterogeneous societies may be inefficient because minorities, rather than free-riders, are expropriated. Even if this is not so, groups' different beliefs about the reasons for expropriation may make the threat of punishment less effective at preventing free-riding. We illustrate our theory with evidence from California mining camps, contemporary India, and US schools. In a public goods experiment using minimal groups and a profitable punishment institution, outgroups were more likely to be punished, and reacted differently to punishment than ingroup members.

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Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia School of Economics Working Paper Series with number 2015-04.

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Date of creation: 02 Apr 2015
Handle: RePEc:uea:ueaeco:2015_04
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