Leveling Up? An Inter-Neighborhood Experiment on Parochialism and the Efficiency of Multi-Level Public Goods Provision

46 Pages Posted: 3 Mar 2017

See all articles by Carlo Gallier

Carlo Gallier

ZEW – Leibniz Centre for European Economic Research

Timo Goeschl

University of Heidelberg - Alfred Weber Institute for Economics

Martin Kesternich

ZEW – Leibniz Centre for European Economic Research

Johannes Lohse

Heidelberg University - Alfred Weber Institute for Economics

Christiane Reif

ZEW – Leibniz Centre for European Economic Research - Environmental and Resource Economics, Environmental Management Research

Daniel Römer

ZEW – Leibniz Centre for European Economic Research

Date Written: February 22, 2017

Abstract

Many public goods can be provided at different spatial levels. Evidence from social identity theory and in-group favoritism raises the possibility that where higher-level provision is more efficient, subjects’ narrow concern for local outcomes (parochialism) could harm efficiency. Building on the experimental paradigm of multi-level public good games and the ‘neighborhood attachment’ concept, we conduct an artefactual field experiment with 600 participants in a setting conducive to parochial behavior. In an inter-neighborhood intraregion design, subjects allocate an endowment between a personal account, a local, and a regional public good account. The between-subjects design varies across two dimensions: One informs subjects that the smaller local group consists of members from their own neighborhood (‘neighbors’). The other varies the relative productivity at the two public goods provision levels. We find evidence for parochialism, but contrary to our hypothesis, parochialism does not interfere with efficiency: The average subject responds to a change in relative productivities at the local and regional level in the same way, whether aware of their neighbors’ presence in the small group or not. The results even hold for subjects with above-median neighborhood attachment and subjects primed on neighborhood attachment.

Keywords: Social Identity; Parochialism; Multi-Level Public Goods, Artefactual Field Experiment

JEL Classification: C9; D7; H4

Suggested Citation

Gallier, Carlo and Goeschl, Timo and Kesternich, Martin and Lohse, Johannes and Reif, Christiane and Römer, Daniel, Leveling Up? An Inter-Neighborhood Experiment on Parochialism and the Efficiency of Multi-Level Public Goods Provision (February 22, 2017). ZEW - Centre for European Economic Research Discussion Paper No. 17-012. Available at SSRN: https://ssrn.com/abstract=2926356 or http://dx.doi.org/10.2139/ssrn.2926356

Carlo Gallier (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Timo Goeschl

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Bergheimer Str. 20
D-69115 Heidelberg
Germany

Martin Kesternich

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Johannes Lohse

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Christiane Reif

ZEW – Leibniz Centre for European Economic Research - Environmental and Resource Economics, Environmental Management Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim
Germany

Daniel Römer

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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