scholarly journals Distortionary Taxes and the Provision of Public Goods

1992 ◽  
Vol 6 (3) ◽  
pp. 117-131 ◽  
Author(s):  
Charles L Ballard ◽  
Don Fullerton
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Optimal Level ◽  
Marginal Rate ◽  
The Public ◽  
Lump Sum ◽  
Marginal Rates Of Substitution ◽  
Efficient Level ◽  
Distortionary Taxes ◽  
The Cost

Economists have long been concerned with finding an efficient level of public expenditure. The classic statement of the problem was given by Paul Samuelson (1954). An optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good (ΣMRS = MRT). However, Samuelson's formula assumes that all of the revenue needed to finance public goods can be raised with lump-sum taxes. Since this is not generally possible, the formula must be modified to account for the distortionary effects of the tax system. An appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds (MCF). In the case of Samuelson's formula, where government is entirely financed with lump-sum taxes, the MCF would be exactly 1.0. In the traditional view of economists, distortionary taxes cause the MCF to be greater than one, thus raising the cost of providing public goods. In this paper, we discuss some cases where the MCF may be less than one. We will illustrate this possibility using numerical examples for labor taxes.

scholarly journals Punishment Strategies across Societies: Conventional Wisdoms Reconsidered

Games ◽  
2021 ◽  
Vol 12 (3) ◽  
pp. 63
Author(s):  
Ramzi Suleiman ◽  
Yuval Samid
Keyword(s):  
Public Goods ◽  
Strong Predictor ◽  
Social Environments ◽  
Public Goods Game ◽  
The Public ◽  
Free Riders ◽  
The World ◽  
Emergence Of Cooperation ◽  
Using Data ◽  
The Cost

Experiments using the public goods game have repeatedly shown that in cooperative social environments, punishment makes cooperation flourish, and withholding punishment makes cooperation collapse. In less cooperative social environments, where antisocial punishment has been detected, punishment was detrimental to cooperation. The success of punishment in enhancing cooperation was explained as deterrence of free riders by cooperative strong reciprocators, who were willing to pay the cost of punishing them, whereas in environments in which punishment diminished cooperation, antisocial punishment was explained as revenge by low cooperators against high cooperators suspected of punishing them in previous rounds. The present paper reconsiders the generality of both explanations. Using data from a public goods experiment with punishment, conducted by the authors on Israeli subjects (Study 1), and from a study published in Science using sixteen participant pools from cities around the world (Study 2), we found that: 1. The effect of punishment on the emergence of cooperation was mainly due to contributors increasing their cooperation, rather than from free riders being deterred. 2. Participants adhered to different contribution and punishment strategies. Some cooperated and did not punish (‘cooperators’); others cooperated and punished free riders (‘strong reciprocators’); a third subgroup punished upward and downward relative to their own contribution (‘norm-keepers’); and a small sub-group punished only cooperators (‘antisocial punishers’). 3. Clear societal differences emerged in the mix of the four participant types, with high-contributing pools characterized by higher ratios of ‘strong reciprocators’, and ‘cooperators’, and low-contributing pools characterized by a higher ratio of ‘norm keepers’. 4. The fraction of ‘strong reciprocators’ out of the total punishers emerged as a strong predictor of the groups’ level of cooperation and success in providing the public goods.

Ethnic trust, minority status, and public goods in post-conflict societies

2021 ◽  
pp. 002234332098421
Author(s):  
Sam Whitt
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Intergroup Contact ◽  
Minority Group ◽  
Civil Liberties ◽  
Minority Status ◽  
The Public ◽  
Attitudes And Behaviors ◽  
Post Conflict ◽  
History Of

This study considers how ethnic trust and minority status can impact the ability of ethnic groups to pursue cooperative public goods, focusing on groups with a history of conflict and lingering hostility. A public good experiment between ethnic Albanians and Serbs in postwar Kosovo reveals that subjects contribute far more to a mutually beneficial public good when they are part of an experimentally induced coethnic majority. However, when in the minority, subjects not only underinvest, but many actively divest entirely, privatizing the public good. Majority/minority status also has wide-ranging implications for how individuals relate to real-world public goods and the institutions of government that provide them. Compared to majority Albanians, survey data indicate how minority Serbs in Kosovo express greater safety and security concerns, feel more politically, socially, and economically excluded, are more dissatisfied with civil liberties and human rights protections, and are less likely to participate politically or pay taxes to support public goods. Conflict-related victimization and distrust of out-groups are strong predictors of these minority group attitudes and behaviors. This suggests a mechanism for how conflict amplifies out-group distrust, increasing parochial bias in public good commitments, especially among minorities who are wary of exploitation at the hands of an out-group majority. To restore trust, this study finds that institutional trust and intergroup contact are important to bridging ethnic divides that inhibit public good cooperation.

A Model of Inequality Aversion and Private Provision of Public Goods

2020 ◽  
Vol 20 (2) ◽  
Author(s):  
Hide-Fumi Yokoo
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Theoretical Foundation ◽  
Inequality Aversion ◽  
Public Good Provision ◽  
Marginal Rate ◽  
Private Provision ◽  
Marginal Rate Of Substitution ◽  
Good Provision ◽  
Corner Solutions

AbstractI develop a model of inequality aversion and public goods that allows the marginal rate of substitution to be variable. As a theoretical foundation, utility function of the standard public goods model is nested in the Fehr-Schmidt model. An individual’s contribution function for a public good is derived by solving the problem of kinky preference and examining both interior and corner solutions. Results show that the derived contribution function is not monotonic with respect to the other individual’s provision. Thus, the model can be used to explain empirical evidence for the effect of social comparison on public-good provision.

A Case for Private Provision but Collective Ownership of Public Goods

1998 ◽  
Vol 42 (1) ◽  
pp. 90-94 ◽  
Author(s):  
William D. Gerdes
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Private Provision ◽  
The Public ◽  
Collective Ownership ◽  
Free Ride ◽  
Voluntary Exchange

One strategy for generating Pareto results in a public good model is to create an environment where traders internalize the public good externality. The model presented here accomplishes this by separating the provision and ownership of public goods. Such goods are privately provided but collectively owned. Under this arrangement, Lindahl prices are generated through the voluntary exchange activities of consumers. Persistent attempts to free ride are not consistent with maximizing behavior which leads to internalization.

scholarly journals Shame and honour drive cooperation

2011 ◽  
Vol 7 (6) ◽  
pp. 899-901 ◽  
Author(s):  
Jennifer Jacquet ◽  
Christoph Hauert ◽  
Arne Traulsen ◽  
Manfred Milinski
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Tragedy Of The Commons ◽  
Experimental Paradigm ◽  
The Public ◽  
Common Resources ◽  
Public Goods Experiments ◽  
The Commons

Can the threat of being shamed or the prospect of being honoured lead to greater cooperation? We test this hypothesis with anonymous six-player public goods experiments, an experimental paradigm used to investigate problems related to overusing common resources. We instructed the players that the two individuals who were least generous after 10 rounds would be exposed to the group. As the natural antithesis, we also test the effects of honour by revealing the identities of the two players who were most generous. The non-monetary, reputational effects induced by shame and honour each led to approximately 50 per cent higher donations to the public good when compared with the control, demonstrating that both shame and honour can drive cooperation and can help alleviate the tragedy of the commons.

scholarly journals Heterogeneous groups cooperate in public good problems despite normative disagreements about individual contribution levels

2020 ◽  
Vol 10 (1) ◽  
Author(s):  
Kasper Otten ◽  
Vincent Buskens ◽  
Wojtek Przepiorka ◽  
Naomi Ellemers
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Individual Contribution ◽  
Public Goods Game ◽  
Homogeneous Groups ◽  
The Public ◽  
Heterogeneous Groups ◽  
Good Provision ◽  
Good Individual

Abstract Norms can promote human cooperation to provide public goods. Yet, the potential of norms to promote cooperation may be limited to homogeneous groups in which all members benefit equally from the public good. Individual heterogeneity in the benefits of public good provision is commonly conjectured to bring about normative disagreements that harm cooperation. However, the role of these normative disagreements remains unclear because they are rarely directly measured or manipulated. In a laboratory experiment, we first measure participants’ views on the appropriate way to contribute to a public good with heterogeneous returns. We then use this information to sort people into groups that either agree or disagree on these views, thereby manipulating group-level disagreement on normative views. Participants subsequently make several incentivized contribution decisions in a public goods game with peer punishment. We find that although there are considerable disagreements about individual contribution levels in heterogeneous groups, these disagreements do not impede cooperation. While cooperation is maintained because low contributors are punished, participants do not use punishment to impose their normative views on others. The contribution levels at which groups cooperate strongly relate to the average normative views of these groups.

scholarly journals Walk the Talk? The Effect of Voting and Excludability in Public Goods Experiments

2010 ◽  
Vol 2010 ◽  
pp. 1-15 ◽  
Author(s):  
Hans J. Czap ◽  
Natalia V. Czap ◽  
Esmail Bonakdarian
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Driving Forces ◽  
Public Project ◽  
The Public ◽  
Public Projects ◽  
Individual Contributions ◽  
The Individual ◽  
Other Regarding

The purpose of this paper is to investigate the effect of voting and excludability on individual contributions to group projects. We conducted two experiments on excludable and nonexcludable public goods, which provided several important results. First, contrary to our expectations, subjects are generally contributing more to the non-excludable compared to the excludable public good. Second, participating in a vote to choose a public project per se makes no difference in contributions. However, if the project that the individual voted for also gets selected by the group, they contribute significantly more to that project. Third, empathy and locus of control are important driving forces of participation in common projects. Our results have implications on the procedural design of obtaining funding for public projects. First, the public should get involved and have a say in the determination of which project should be realized. Second, it might well pay off to attempt to develop a consensus among the population and obtain near unanimous votes, because in our experiment, subjects discriminate between the project they voted for and the project chosen by the majority. Third, the policy proposers should stress the other-regarding interest of the public good rather than just pecuniary incentives.

scholarly journals Eco-evolutionary spatial dynamics of non-linear social dilemmas

2019 ◽  
Author(s):  
Chaitanya S. Gokhale ◽  
Hye Jin Park
Keyword(s):  
Spatial Structure ◽  
Public Goods ◽  
Public Good ◽  
Spatial Dynamics ◽  
Social Dilemmas ◽  
Evolutionary Games ◽  
Evolution Of Cooperation ◽  
Evolutionary Trajectory ◽  
The Public ◽  
Non Linear

AbstractSpatial dynamics can promote the evolution of cooperation. While dispersal processes have been studied in simple evolutionary games, real-world social dilemmas are much more complicated. The public good, in many cases, does not increase linearly as per the investment in it. When the investment is low, for example, every additional unit of the investment may help a lot to increase the public good, but the effect vanishes as the number of investments increase. Such non-linear behaviour is the norm rather than an exception in a variety of social as well as biological systems. We take into account the non-linearity in the payoffs of the public goods game as well as the natural demographic effects of population densities. Population density has also been shown to impact the evolution of co-operation. Coupling these non-linear games and population size effect together with an explicitly defined spatial structure brings us one step closer to the complexity of real eco-evolutionary spatial systems. We show how the non-linearity in payoffs, resulting in synergy or discounting of public goods can alter the effective rate of return on the cooperative investment. Synergy or discounting in public goods accumulation affects the resulting spatial structure, not just quantitatively but in some cases, drastically changing the outcomes. In cases where a linear payoff structure would lead to extinction, synergy can support the coexistence of cooperators and defectors. The combined eco-evolutionary trajectory can thus be qualitatively different in cases on non-linear social dilemmas.

scholarly journals Understanding policing as a mechanism of cheater control in cooperating bacteria

2018 ◽  
Author(s):  
Tobias Wechsler ◽  
Rolf Kümmerli ◽  
Akos Dobay
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Parameter Space ◽  
Environmental Conditions ◽  
Genetic Linkage ◽  
Toxin Production ◽  
Evolutionary Stability ◽  
Conditional Strategy ◽  
The Public ◽  
Resistant Mutants

AbstractPolicing occurs in insect, animal and human societies, where it is used as a conditional strategy to prevent cheating and enforce cooperation. Recently, it has been suggested that policing might even be relevant in enforcing cooperation in much simpler organisms such as bacteria. Here, we used individual-based modelling to develop an evolutionary concept for policing in bacteria, and identify the conditions under which it can be adaptive. We modelled interactions between cooperators, producing a beneficial public good, cheaters exploiting the public good without contributing to it, and public good producing policers that secrete a toxin to selectively target cheaters. We found that toxin-mediated policing is favored when (i) toxins are potent and durable, (ii) cheap to produce, (iii) cell and public good diffusion is intermediate, and (iv) toxins diffuse farther than the public good. Overall, we show that toxin-mediated policing can enforce cooperation, but the parameter space where it is beneficial seems quite narrow. Moreover, we found that policing decays when the genetic linkage between public good and toxin production breaks. This is because policing is itself a public good, offering protection to toxin-resistant mutants that still produce public goods, yet no longer invest in toxins. Our work suggests that very specific environmental conditions are required for genetically fixed policing mechanisms to evolve in bacteria, and offers empirically testable predictions for their evolutionary stability.

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