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Public Goods Provision with Rent-extracting Administrators

Tobias Cagala, Ulrich Glogowsky, Veronika Grimm and Johannes Rincke

Economic Journal, 2019, vol. 129, issue 620, 1593-1617

Abstract: This article studies public goods provision when contributors repeatedly interact with rent-extracting administrators. Our main finding is that the presence of an administrator reduces contributions but only because rent extraction lowers the marginal per capita return of investing in the public good. Analysing the interactions between the contributors and the administrator, we demonstrate that rent-extraction and cooperation shocks trigger short-run adjustments in agents’ behaviour. However, shocks do not have permanent effects. This explains the long-run resilience of cooperation to rent extraction. We also show that cooperative attitudes and trust explain the heterogeneity in the short-run volatility of public goods provision.

Date: 2019
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Working Paper: Public Goods Provision with Rent-Extracting Administrators (2017) Downloads
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