Public Goods Provision with Rent-Extracting Administrators

35 Pages Posted: 16 Feb 2018

See all articles by Tobias Cagala

Tobias Cagala

Deutsche Bundesbank

Ulrich Glogowsky

Ludwig Maximilian University of Munich (LMU)

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics

Johannes Rincke

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2018

Abstract

This paper studies public goods provision in an experiment in which contributors repeatedly interact with rent-extracting administrators. Our main result is that the presence of an administrator reduces contributions but only because rent extraction lowers the MPCR. Analysing the dynamic interactions between the contributors and the administrator, we demonstrate that rent-extraction and cooperation shocks trigger short-run adjustments in the agents’ behaviour. However, shocks do not have permanent effects. This explains the long-run resilience of cooperation to rent extraction. We also show that cooperative attitudes and trust are traits that explain permanent differences in the short-run volatility of public goods provision.

Keywords: cooperation, rent extraction, corruption, trustworthiness, public goods, public trust game, panel vector autoregressive model

JEL Classification: C320, C910, C920, H410

Suggested Citation

Cagala, Tobias and Glogowsky, Ulrich and Grimm, Veronika and Rincke, Johannes, Public Goods Provision with Rent-Extracting Administrators (January 11, 2018). CESifo Working Paper Series No. 6801, Available at SSRN: https://ssrn.com/abstract=3123629

Tobias Cagala

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Ulrich Glogowsky (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics ( email )

Nuremburg
Germany

Johannes Rincke

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

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