Sarah Jacobson ,Williams College

 

Sarah Jacobson ,Williams College

Sage 3205

October 12, 2011 4:00 PM - 5:30 PM

Economics Seminar presentation by Sarah Jacobson ,Williams College

Abstract:

What happens when Community A's mutually beneficial common project has downstream externalities that hurt Community B? We use a lab experiment to study contributions to a common fund when the common fund has characteristics of both a public good and a public bad. Subjects who are in-group members can decide how much to contribute and are benefited by the fund as by a public good; but common fund contributions reduce the payoff of subjects outside the in-group ("Scapegoats"), so much so that common fund contributions are overall anti-social. We make no effort to promote in-group identification. We find that in the simple case in which all in-group members have the same return to the common fund, the addition of scapegoats to a group reduces contribution levels by nearly half, although positive contributions do continue. We also study the case in which in-group returns are asymmetric (but all positive) and this asymmetry rotates in a way that allows subjects to engage in reciprocal giving. Here, subjects' contributions are only slightly diminished by the introduction of scapegoats. Reciprocal giving (giving more in rounds in which previously-kind subjects earn a high return, and less in rounds in which previously-unkind subjects earn a high return) is observed both when scapegoats are and are not present. These results show that downstream externalities can restrain subjects to a lower level of project provision than they would otherwise choose. However, this restraint is limited and depends on the structure of the institution, and in some cases this restraint may be swamped by other social forces.

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