Green Goods: Are They Good or Bad News for the Environment? Evidence from a Laboratory Experiment on Impure Public Goods

Abstract

An impure public good is a commodity that combines public and private characteristics in fixed proportions. Green goods such as dolphin-friendly tuna or green electricity programmes provide increasingly popular examples of impure public goods. We design an experiment to test how the presence of impure public goods affects pro-social behaviour. We set parameters, such that from a theoretical point of view the presence of the impure public good is behaviourally irrelevant. In a baseline setting, where the impure public good provides only small contributions to the public good, we observe that on aggregate pro-social behaviour, defined as total contributions to the public good, is lower in the presence of the impure good. Some individuals do not alter their decisions, but roughly two fifths of subjects make a lower contribution to the public good in the presence of the impure public good. On the contrary, in the case where the impure public good favours the public good component at the expense of private earnings, individuals are unaffected in their behaviour. We conclude that the presence of green goods which have only a small environmental component may reduce pro-environmental behaviour.

Keywords: green goods, impure public goods, pro-social behaviour, social norms, experimental economics

JEL Classification: C91, D64, H41, Q59