Document Type
Discussion Paper
Publication Date
10-1-2011
CFDP Number
1830R2
CFDP Revision Date
2015-07-01
CFDP Pages
52
Abstract
We use a laboratory experiment to compare general equilibrium economies in which agents individually allocate their private goods among consumption, investment in production and maintenance of a depreciating public facility. The public facility is financed either by voluntary anonymous contributions (VAC) or taxes. We find that rates of taxation chosen by majority vote remain at an intermediate level, converging neither to zero nor to 100%, and the experimental economies sustain public goods at levels between the finite- and infinite-horizon optima. This contrasts with a rapid decline of public goods under voluntary anonymous contributions (VAC). Both the payoff efficiency and production of private goods are higher when taxes are set endogenously instead of being fixed at the optimum level. When subjects choose between VAC and taxation, 23 out of 24 majority votes favor taxation.
Recommended Citation
Huber, Juergen; Shubik, Martin; and Sunder, Shyam, "Public Goods through Taxation in a General Equilibrium Economy: Experimental Evidence" (2011). Cowles Foundation Discussion Papers. 2185.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2185