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Growth and inequality in public good games

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  • Gaechter, S.

    (Externe publicaties SBE)

  • Mengel, F.

    (Microeconomics & Public Economics)

  • Tsakas, E.

    (Microeconomics & Public Economics)

  • Vostroknutov, A.

    (Microeconomics & Public Economics)

Abstract

In a novel experimental design we study dynamic public good games in which wealth is allowed to accumulate. More precisely each agent's income at the end of a period serves as her endowment in the following period. In this setting growth and inequality arise endogenously allowing us to address new questions regarding their interplay and effect on cooperation levels. We find that average cooperation levels in this setting are high (between 20-60% of endowments) and that amounts contributed do not decline over time. Introducing the possibility of punishment leads to lower group income, but less inequality within groups. In both treatments (with and w/o punishment) inequality and group income are positively correlated for poor groups (with below median income), but negatively correlated for rich groups (with above median income). There is very strong path dependence: inequality in early periods is strongly negatively correlated with group income in later periods. These results give new insights into why people cooperate and should make us rethink previous results from the literature on repeated public good games regarding the decay of cooperation in the absence of punishment.

Suggested Citation

  • Gaechter, S. & Mengel, F. & Tsakas, E. & Vostroknutov, A., 2013. "Growth and inequality in public good games," Research Memorandum 070, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2013070
    DOI: 10.26481/umagsb.2013070
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    Cited by:

    1. Guererk, Oezguer & Rockenbach, Bettina & Wolff, Irenaeus, 2010. "The effects of punishment in dynamic public-good games," MPRA Paper 22097, University Library of Munich, Germany.
    2. Robin Maialeh, 2016. "Fundamentální koncept nerovnosti v perspektivě paretovské ekonomie [A Fundamental Concept of Inequality in the Perspective of Paretian Economics]," Politická ekonomie, Prague University of Economics and Business, vol. 2016(8), pages 973-987.
    3. Annarita COLASANTE & Alberto RUSSO, 2014. "The Impact of Inequality on Cooperation: An Experimental Study," Working Papers 401, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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