Exposure to Inequality may Cause Under-Provision of Public Goods: Experimental Evidence

23 Pages Posted: 18 Mar 2020 Last revised: 21 Sep 2020

See all articles by Pablo Brañas-Garza

Pablo Brañas-Garza

Universidad Loyola Andalucia

Elena Molis

University of Granada

Levent Neyse

German Institute for Economic Research (DIW Berlin); WZB Berlin Social Science Center; IZA Institute of Labor Economics

Date Written: 2020

Abstract

Economic inequality is rising globally and due to developments in information technologies and globalization, nowadays individuals are more exposed to this inequality than ever. Recent studies show that exposure to inequality may shape economic decisions. In this article, we test whether contributions in the public goods game are sensitive to information about inequality of personal benefits between groups. Our results show that learning the return levels of another group with higher (lower) benefits decreases (increases) the contributions with a stronger reaction by low benefit groups. Our further tests show that this effect diminishes when the benefit difference between the groups gets smaller. These results suggest that exposure to inequality might have
detrimental impact on public goods provision, yet this effect gets negligible as economic
inequality reduces.

Keywords: Public Goods; Inequality; Cooperation; Information; Experiment

JEL Classification: C9, D8, H4

Suggested Citation

Brañas-Garza, Pablo and Molis, Elena and Neyse, Levent, Exposure to Inequality may Cause Under-Provision of Public Goods: Experimental Evidence (2020). Available at SSRN: https://ssrn.com/abstract=3542317 or http://dx.doi.org/10.2139/ssrn.3542317

Pablo Brañas-Garza

Universidad Loyola Andalucia ( email )

c/ Escritor Castilla Aguayo
Córdoba, 14004
Spain

HOME PAGE: http://https://sites.google.com/site/pablobranasgarza/home

Elena Molis

University of Granada ( email )

C/Rector López Argueta S/N
Granada, Granada 18071
Spain

Levent Neyse (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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