Working Paper Abstract

Inequality, Group Cohesion, and Public Good Provision: An Experimental Analysis
Lisa R. Anderson, Jennifer M. Mellor, Jeffrey Milyo
 

Abstract:
Recent studies argue that inequality exerts a negative influence on numerous social indicators. One explanation for this is that inequality reduces group cohesiveness (a component of social capital) and dampens popular support for expenditures on public goods and social programs. In light of competing theoretical explanations and mixed empirical evidence of the effect of inequality on government provision of public goods, we conduct a novel test using a public goods experiment. Our experimental design introduces inequality by manipulating the levels and distributions of fixed payments given to subjects for participating in the experiment. When made salient through public information about each individual’s standing within the group, inequality in the distribution of fixed payments reduces contributions to the public good for all group members. Once we control for the unequal distribution of payments, an individual’s own relative standing within the group has no independent effect on contributions.

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