Taxation, redistribution and observability in social dilemmas

Daniel Brent, Lata Gangadharan (lata.gangadharan@monash.edu), Anca Mihut (mihut@gate.cnrs.fr) and Marie Claire Villeval
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Anca Mihut: Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France

No 1726, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

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: Common Pool Resource game; taxation mechanisms; observability; cooperation; heterogeneity; experiment (search for similar items in EconPapers)
JEL-codes: C92 D74 H23 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cdm, nep-env, nep-exp, nep-ltv, nep-pub and nep-res
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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 (2019)
Working Paper: Taxation, redistribution and observability in social dilemmas (2017)
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