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It is Hobbes, not Rousseau: an experiment on social insurance

Antonio Cabrales, Rosemarie Nagel and Sevi Rodríguez Mora ()

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: We perform an experiment on social insurance to provide a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothing to redistribute. A solution to the repeated game allows for redistribution and high effort, by the threat to revert to the worst of these equilibria. Our results show that redistribution with high effort is not sustainable. The main reason for the absence of redistribution is that rich agents do not act differently depending on whether the poor have worked hard or not. There is no social contract by which redistribution may be sustained by the threat of punishing the poor if they do not exert effort. Thus, the explanation of the behavior of the subjects lies in Hobbes, not in Rousseau.

Keywords: Social; insurance; Political; equilibrium; Voting; Multiple; equilibria; Experiments (search for similar items in EconPapers)
JEL-codes: C72 C92 D72 E24 H24 I31 O38 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp, nep-hpe, nep-ias and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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