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On the crowding effect of public policies
Clara Villegas-PalacioUniversity of Gothenburg
Camp resource XVIINC State University
June, 2010
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Presentation Outline
Introduction – crowding motivation theory Crowding effect of non-monetary interventions on voluntary
contributions to PGo Does disclosure crowd-out cooperation?
(Joint work with Peter Martinsson)• Introduction• Experimental Design• Main Results
Crowding effect of monetary interventions on VC to PGo Short run and long run crowding effects of subsidies on
voluntary contributions Public goods(To be done with Jorge Bonilla and Peter Martinsson)
• Experimental design
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Introduction Extensive evidence in the literature of voluntary contributions
to public goods (PG)
Individual behavior in PG situations is not driven by economic motives alone
Different motivations (Nyborg and Rege 2003)o Altruism (Hammond 1987; Andreoni 1990)o Social norms (Holländer 1990, Rege 2000) o Fairness (Fehr and Schmidt 1999)
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Introduction
These motivations may interact with an introduced intervention (policy) leading to crowding in/out of contributions– Consequences for the provision of PGoMonetary interventions
• Nyborg and Rege (2000) analyze possible crowding effects of subsidization of private contributions
oNon monetary interventions• Cardenas and Stranlund (2000): effect of rules and
regulations imposed from outside the community on local environmental quality
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Non-monetary intervention
Does disclosure crowd out cooperation?Peter Martinsson, Clara Villegas
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Previous literature (Bénabou and Tirole 2006; Ariely et al.2009) discuss three broad motivations for individuals to behave pro-socially:
o Intrinsic motivation - altruismo Extrinsic motivation – monetary rewardo Image motivation – social approval
Bénabou and Tirole (2006) suggest possible crowding effects of disclosure: “Altering any of the three components of motivation,
for instance through the use of extrinsic incentives or a greater publicity given to action, changes the meaning attached to pro-social behavior”
Introduction
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Introduction - Hypotheses
Investigate crowding effects of disclosure on voluntary contributions to a PG using an experimental approach
Why do we expect an interaction between disclosure and motivations for voluntary cooperation?
External interventions Intrinsic motivation
Disclosure (non monetary intervention)
Image motivations
(-) “Good actions become suspected of being motivated by appearances”
(+) or (-) by social norms
(+): Perceived as supportive
(-): Perceived as controlling
Total effect = f (crowding effect on intrinsic motivation +
crowding effect on image motivation)
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Introduction - Literature
Mixed evidence in previous experimental literature:o Rege and Telle (2004): Disclosure crowds- in contributionso Noussair and Tucker (2007): No significant difference between
standard and disclosure treatment
Lab experiment – (Linear) Public Goods game – our standard treatment
Experiments are run with students as participants People are randomly allocated in groups of 4 participants Each subject receives an endowment of 20 tokens Subject decides on contribution to the Public good For each token contributed to the public good each subject in the
group receives 0.4 tokens All decisions are anonymous
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Experimental design
Out-group disclosure (Contributions and identity announced to all
participants in the session)
NO YES
In-group disclosure(Contributions and identity announced only to group members)
NO
Treatment 1Standard PGG
without disclosure
Treatment 2PGG with only
out-goup disclosure
YES
Treatment 3PGG with only in-group disclosure
Treatment 4PGG with both
in-group and out-group disclosure
One-shot (no strategic behavior), linear public good game conducted with students in Colombia.
Two sessions per treatment. 24 participants in each session Randomly allocated to groups of 4 members
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Some results
Mean unconditional contribution
Out-group disclosure (Contributions and identity
announced to all participants in the session)
NO YES
In-group disclosure
(Contributions and identity
announced only to group
members)
NOTreatment 1
Mean= 39.9%
Treatment 2
Mean= 43.85%
YESTreatment 3
Mean= 43.23%
Treatment 4
Mean= 48.13%
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Some results
0.1
.2.3
0.1
.2.3
0 5 10 15 20 0 5 10 15 20
T1. No disclosure T2. Out-group disclosure
T3. In-group disclosure T4. Joint in-group and out-group disclosure
Unconditional contribution
We find that when implementing joint in-group and out-group disclosure:o The proportion of subjects contributing the whole
endowment significantly increases compared to in the anonymity treatment
o The proportion of non-contributions does not change significantly.
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Discussion and conclusions
Significantly higher variance in unconditional contributions under joint disclosure: unconditional contribution may be moved in various ways
Effect of the context of the game in our results.
Groups in our study studies lack any history of interaction which may be crucial for pro-social behaviouro No incentives for reputation buildingo Reciprocity is not present
Exogenous vs. Endogenous choice of institutions
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Monetary intervention
Crowding effects of subsidies to voluntary contributions to public goods.
An experimental test
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Introduction Are there long-run crowding effects of PES schemes on
voluntary conservation? (Field experiment with farmers in Colombia)
More general question to be studied first: How do subsidies affect voluntary cooperation in a PG?
Do we observe a short-run crowding-in/out effect on voluntary contributions?
What would happen if the policy is reversed? (Long run crowding effect)
Gächter et al (2009): one-shot and repeated gift-exchange experiments
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Which hypothesis can be drawn from existing theory?
Economics literature- Nyborg and Rege (2003)o Short run: no effect / crowding-in effecto Long run: crowding-in effect.
Psycological literature: o Short run: crowding ino Long run: crowding out
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Experimental design
Treatment label Phase 1(Period 1-10)
Phase 2(Period 11-20)
Phase 3(Period 21-30)
NS-NS-NS PG game with No subsidy (NS)
PG game with No subsidy (NS)
PG game with No subsidy (NS)
12 groups, 4 subjects each(48 subjects)
NS-S-NS PG game with No subsidy (NS)
PG game with subsidy (S)
PG game with No subsidy (NS)
12 groups, 4 subjects each(48 subjects)
Q1. Are there short-run and long-run crowding effects when introducing a subsidy to voluntary contributions to Public Goods?First set of experiments:
Confounding effects: strategic contributionsTo avoid strategic motivations: Sequence of one shot PGG with new matching every period.
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Experimental design
Treatment label
Phase 1(Period 1-10)
Phase 2(Period 11-20)
Phase 3(Period 21-30)
NS-NS-NS
NS-S-NS
Q1. Are there short-run and long-run crowding effects when introducing a subsidy to voluntary contributions to Public Goods?
Short run crowding:
Long run crowding:
02)(2)( PHNSNSNSPHNSSNS CC
2)( PHNSNSNSC 3)( PHNSNSNSC 1)( PHNSNSNSC
1)( PHNSSNSC 2)( PHNSSNSC 3)( PHNSSNSC
03)(3)( PHNSNSNSPHNSSNS CC
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Experimental design
Q2. Are there crowding effects under repeated interaction?Second set of experiments: Same experimental design but with fixed groups during the 30 periods.
Q3. Does the experience of no-subsidy matter for short and long-run crowding effects? Add one extra-treatment to the first and second set of experiments
Treatment label
Phase 1(Period 1-10)
Phase 2(Period 11-20)
Phase 3(Period 21-30)
S-NS-NS PG game with subsidy (S)
PG game with No subsidy (NS)
PG game with No subsidy (NS)
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Experimental design
To be decided: How should we introduce the subsidy into the game?
• To present it as a subsidy comming from a third agent (problematic)
• To make the contributions to the PG cheaper
• Subjects are taxed in the NS treatment and the tax is removed for the S treatment
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Thanks
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Which hypothesis can we draw from existing theory?
Nyborg and Rege (2003) discuss some models that can explain voluntary contributions and their implications for crowding effects:o Homo Economicus:
• Short run: subsidies have no effecto Pure altruism:
• Short run: subsidies have no effecto Impure altruism:
• Short run: subsidies crowd-in contributions
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Which hypothesis can we draw from existing theory?
Nyborg and Rege (2003):o Social norms models
• Holländer,1990: crowding-in in short run• Rege, 2003: crowding-in in both short and
long runo Fairness models: crowding-in in short run
Psycological literature: o Short run: crowding ino Long run: crowding out
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Introduction - Literature
Mixed evidence in previous literature:o Rege and Telle (2004): Disclosure crowds- in contributionso Noussair and Tucker (2007): No significant difference between
standard and disclosure treatment
Disclosure of behavior but not identityo Sell and Wilson (1991): Crowds-in contributionso Croson (2001): multiperiod PGG. No impact on contributions
Field experiment:o Soetevent (2005): Church offers among 30 churches in the
Netherlands• Crowds-in donation to causes outside the church