Does Corruption Affect the Private Provision of Public Goods?

Abstract

We present controlled experimental evidence on how corruption affects the private provision of public goods. Subjects in our experiment donate to non-profit associations. The associations provide local public goods that benefit all subjects. We compare average contributions between two conditions with the same efficiency: a corruption condition, where an administrator can expropriate part of contributions, and a control condition without corruption. Compared to the control condition, subjects matched to an expropriating administrator significantly reduce their contributions. Hence, contributors are less inclined to behave prosocially (i.e. are more likely to free-ride) if they are exposed to corruption. We demonstrate that this effect works through a specific channel: corruption breaks the otherwise positive link between baseline preferences for cooperation and private contributions to public goods.

Keywords: corruption, private provision of public goods, contribution behavior, cooperation, prosocial behavior

JEL Classification: D02, D03, H41