Taxation, redistribution and observability in social dilemmas

Daniel Brent, Lata Gangadharan (), Anca Mihut and Marie Claire Villeval ()
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Anca Mihut: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique
Marie Claire Villeval: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique

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Abstract: In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.

Keywords: heterogeneity; cooperation; experiment; taxation mechanisms; observability (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

Published in Journal of Public Economic Theory, 2019, 21 (5), pp.826-846. ⟨10.1111/jpet.12350⟩

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Related works:
Journal Article: Taxation, redistribution, and observability in social dilemmas (2019)
Working Paper: Taxation, redistribution and observability in social dilemmas (2017)
Working Paper: Taxation, redistribution and observability in social dilemmas (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01930721

DOI: 10.1111/jpet.12350

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