Working Paper: CEPR ID: DP13204
Authors: David J. Kusterer; Patrick W. Schmitz
Abstract: Who should own public projects? We report data from a laboratory experiment with 480 participants that was designed to test Besley and Ghatak's (2001) public-good version of the Grossman-Hart-Moore property rights theory. Consider two parties, one of whom can invest in the provision of a public good. The parties value the public good differently. Besley and Ghatak (2001) argue that more investments will be made if the high-valuation party is the owner, regardless of whether or not this party is the investor. While our experimental results provide support for the Grossman-Hart-Moore theory, they cast some doubts on the robustness of Besley and Ghatak's (2001) conclusion.
Keywords: Property Rights; Public Goods; Incomplete Contracts; Investment Incentives; Laboratory Experiments
JEL Codes: D23; D86; H41; L33; C92
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High-valuation party ownership (P26) | Investment frequency (G11) |
| Low-valuation party ownership (G32) | Investment frequency (G11) |
| High-valuation party ownership (P26) | Investment incentives (G31) |
| High-valuation party ownership (parameter constellation 1) (P26) | Significant investment rates (G31) |
| High-valuation party ownership (parameter constellation 2) (P26) | Investment rates (G31) |
| Negotiations break down (D74) | High-valuation party does not provide public good (H41) |
| Disagreement payoffs + Inefficient punishment behavior (C72) | Investment decisions (G11) |