Division of Economics and Business Working Paper Series A Shared Sense of Responsibility: Money versus effort contributions in the voluntary provision of public goods

A frequently cited argument against the use of market-based instruments to provide public goods is that they diminish our sense of responsibility to be good citizens. In this paper, we report on the results of a laboratory experiment designed to explore the idea that this distrust stems from the ability of some members of society to contribute to the public good with money instead of time or effort even when the level of total contributions is held constant. In our experiments, subjects complete lab tasks as a contribution to a public good—carbon emission reductions. We look at how the number of lab tasks completed by subjects changes when their peers take advantage of an offer to buy out, i.e., contribute money in lieu of effort. We find that on average subjects reduce the number of completed tasks when their peers buy out. However, the aggregate result masks significant heterogeneity across individual responses. Those who choose not to buy out despite its expected profitability have no response to the treatment while those for whom it would not be profitable to buy out register large reductions in effort contributions. The magnitude of these responses is increasing in the share of the group that accepts the buyout offer, suggesting that it is the act of peers buying out rather than the simple introduction of monetary incentives that is the source of the effect. JEL classifications: C90, C91, H41, Q54