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Public goods provision, inequality and taxes

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Abstract

The impact of redistributive policies on voluntary contributions is still not well understood. While a higher level of redistributive taxation decreases the price of voluntary giving, it also changes the income distribution by decreasing income inequality. This paper provides a controlled laboratory experiment to investigate the net impact of the tax rate on public goods provision. The experimental findings show that while the participants decrease their voluntary contributions as the pre-tax income distribution becomes more equal, they increase their contributions with taxation. These findings have important implications for government policies regarding privately provided public goods.

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Authors and Affiliations

  1. Research Center for Group Dynamics, Institute for Social Research, University of Michigan, Ann Arbor, USA

    Neslihan Uler

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Correspondence to Neslihan Uler.

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I am grateful to Andrew Schotter, Debraj Ray and Guillaume Frechette for their constant support throughout the project. I thank Jacob Goeree and two anonymous referees for their extensive and helpful comments. I also thank Marina Agranov, Abigail Brown, Mark Dean, Pinar Derin, Basak Gunes, Kyle Hyndman, Silvana Krasteva, Kai-Uwe Kuhn, Yusufcan Masatlioglu, Doug Smith, Ariel Rubinstein and Chloe Tergiman for helpful comments. This research was supported by the C.V. Starr Center for Applied Economics and the Center for Experimental Social Science at New York University.

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Uler, N. Public goods provision, inequality and taxes. Exp Econ 14, 287–306 (2011). https://doi.org/10.1007/s10683-010-9268-y

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