Individual Responsibility and the Funding of Collective Goods

IZA Discussion Paper No. 3041

GATE Working Paper Series No. 07-18

43 Pages Posted: 16 Sep 2007

See all articles by Louis Levy Garboua

Louis Levy Garboua

Universite de Paris I (CES) - Paris School of Economics, and CIRANO

Claude Montmarquette

Center for Interuniversity Research and Analysis on Organization (CIRANO)

Marie Claire Villeval

GATE, CNRS

Date Written: September 2007

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.

Keywords: collective goods, experiment, interior Pareto optimum, rationing, responsibility, taxation

JEL Classification: C91, H21, H30, H41, H50

Suggested Citation

Levy Garboua, Louis and Montmarquette, Claude and Villeval, Marie Claire, Individual Responsibility and the Funding of Collective Goods (September 2007). IZA Discussion Paper No. 3041, GATE Working Paper Series No. 07-18, Available at SSRN: https://ssrn.com/abstract=1014382 or http://dx.doi.org/10.2139/ssrn.1014382

Louis Levy Garboua (Contact Author)

Universite de Paris I (CES) - Paris School of Economics, and CIRANO ( email )

106/112 boulevard de l'Hopital
Paris Cedex 13, 75647
France
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HOME PAGE: http://team.univ-paris1.fr/teamperso/levygarb/louis.htm

Claude Montmarquette

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th Floor
Montreal, Quebec H3C 3J7
Canada
(514) 985-4015 (Phone)
(514) 985-4039 (Fax)

Marie Claire Villeval

GATE, CNRS ( email )

93, chemin des Mouilles
Ecully, 69130
France
+33 472 86 60 79 (Phone)
+33 472 86 60 90 (Fax)

HOME PAGE: http://sites.google.com/view/marie-claire-villeval

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