Public Goods, Property Rights, and Investment Incentives: An Experimental Investigation

60 Pages Posted: 14 Mar 2019

See all articles by David J. Kusterer

David J. Kusterer

University of Cologne - Department of Economics

Patrick W. Schmitz

University of Cologne; Centre for Economic Policy Research (CEPR)

Date Written: February 2019

Abstract

Who should own public projects? We report data from a laboratory experiment with 480 participants that was designed to test Besley and Ghatak's (2001) public-good version of the Grossman-Hart-Moore property rights theory. Consider two parties, one of whom can invest in the provision of a public good. The parties value the public good differently. Besley and Ghatak (2001) argue that more investments will be made if the high-valuation party is the owner, regardless of whether or not this party is the investor. While our experimental results provide support for the Grossman-Hart-Moore theory, they cast some doubts on the robustness of Besley and Ghatak's (2001) conclusion.

Keywords: Property rights, Public goods, Incomplete contracts, Investment incentives, Laboratory experiments

JEL Classification: D23, D86, H41, L33, C92

Suggested Citation

Kusterer, David J. and Schmitz, Patrick W., Public Goods, Property Rights, and Investment Incentives: An Experimental Investigation (February 2019). Available at SSRN: https://ssrn.com/abstract=3340856 or http://dx.doi.org/10.2139/ssrn.3340856

David J. Kusterer

University of Cologne - Department of Economics ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Patrick W. Schmitz (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

HOME PAGE: http://schmitz.uni-koeln.de/index.php?s=mitarbeiter&t=schmitz

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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