Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 655: Public Goods and Minimum Provision Levels: Does the institutional formation affect cooperation?
Peter Martinsson () and Emil Persson ()
Additional contact information
Peter Martinsson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O Box 640, SE 40530 Gothenburg, Sweden
Emil Persson: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O Box 640, SE 40530 Gothenburg, Sweden
Abstract: We investigate the role of institutional formation on the implementation of a binding minimum contribution level in a linear public goods game. Groups either face the minimum level exogenously imposed by a central authority or are allowed to decide for themselves by means of a group vote whether or not a minimum level should be implemented. We find a binding minimum contribution level to have a positive and substantially significant effect on cooperation. The main impact is on the extensive margin, meaning that it is possible to force free riders to increase their contribution without crowding out others’ voluntary contributions. This result is robust to the mode of implementation and thus when the minimum level is enforceable, it is a simple policy that will increase provision of the public good.
Keywords: Public goods; Minimum level; Voting; Experiment
31 pages, April 2016
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