Do people invest in local public goods with long-term benefits: Experimental evidence from a shanty town in Peru

De Hoop, Thomas and Van Kempen, Luuk and Fort, Ricardo (2010): Do people invest in local public goods with long-term benefits: Experimental evidence from a shanty town in Peru.

Abstract

This paper discusses voluntary contributions to health education in a shanty town in Peru, using a new experimental setup to identify voluntary contributions to local public goods. The experiment enables individuals to contribute to a health education meeting facilitated by an NGO, which they know will only be organised if the cumulative investment level exceeds a certain threshold value. In contrast to expectations of aid distributors, individuals contributed a substantial amount of money, despite the long-term nature of the health benefits from health education. High discount rates only seem to have had a detrimental effect on investment in a poorer subsample. Results from a complementary experiment, which identifies donations to a nutrition program, suggest that positive beliefs about short-term benefits from health education in the form of learning effects have played an important role in the investment decision. The results indicate that channelling decision-making power about public good provision to beneficiaries not necessarily implies a crowding out of investment in local public goods with long-term benefits. Hence, particular attention is given to the potential role of cash transfers in the financing of local public goods.

• Item Type: MPRA Paper
• Language: English
• Keywords: Health education, Field Experiment, Public Good, Peru
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments; I - Health, Education, and Welfare > I1 - Health

References

Andreoni, J. (1990). Impure altruism and donations to public goods: A theory of warm-glow giving? Economic Journal, 100(401), 464-477.

Andreoni, J. (1998). Toward a theory of charitable fund-raising, Journal of Political Economy, 106(6), 1186-1213

Attanasio, O. Fitzsimons, E. Gomez, A. Gutierrez, I. M. & Mehir, C. (2010). Children’s schooling and work in the presence of a conditional cash transfer program in rural Colombia, Economic Development and Cultural Change, 58(2), 181-210.

Banerjee, A. Duflo, E. Glennerster, R. & Kothari, D. (2008). Improving immunization coverage in rural India: A clustered randomized controlled evaluation of immunization campaigns with and without incentives, Unpublished Manuscript MIT, Cambridge.

Bekkers, R. & Wiepking, P. (2007). Generosity and philanthropy: A literature review, Paper Presented at the Civil Society Congress, Chicago.

Bohm, P. (1972). Estimating demand for public goods: An experiment. European Economic Review, 3(2), 111-130.

Borghi, J. & Jan, S. (2008). Measuring the benefit of health promotion programmes: Application of the contingent valuation method. Health Policy, 87(2), 235-248.

Brown-Kruse, J. & Hummels, D. (1993). Gender effects in laboratory public goods contribution: Do individuals put their money where their mouth is? Journal of Economic Behavior and Organization, 22(3), 255-257.

Cardenas, J. (2004). Norms from outside and from inside: An experimental analysis on the governance of local ecosystems, Forest Policy and Economics, 6(3-4), 229-241.

Cardenas, J. & Carpenter, J. (2008). Behavioural development economics: Lessons from field labs in the developing world, Journal of Development Studies, 44(3), 311-338.

Carvalho, L. S. (2008). Poverty and time preferences, Unpublished Manuscript Princeton University, Princeton.

Clarke, F. C. & Laurie, N. (2000). Gender, age, and exclusion: A challenge to community organisations in Lima, Peru, Gender and Development, 8(2), 80-89.

Cooper, R. DeJong, D. V. R. Forsythe & T.W. Ross (1996). Cooperation without reputation: Experimental evidence from Prisoner’s Dilemma Games, Games and Economic Behaviour 12(2), 187-218

Croson, R. & Marks, M. (2000). Step returns in threshold public goods: A meta- and experimental analysis, Experimental Economics, 2(3), 239-259

Drèze, J. & Kingdon, G.G. (2001). School participation in rural India, Review of Development Economics, 5(1), 1-24.

Duflo, E. Kremer, M. & Robinson, J. (2008). How high are rates of return to fertilizer? Evidence from field experiments in Kenya, American Economic Review, 98(2), 482-488.

Duflo, E. Kremer, M. & Robinson, J. (2009). Nudging farmers to use fertilizer: Evidence from Kenya, NBER Working Paper #15131, Cambridge.

Fehr, E. & Gächter, S. (2001). Fairness and retaliation: The economics of reciprocity, Journal of Economic Perspectives, 14(3), 559-581.

Frederick, S. Loewenstrein, G. & O’Donoghue, T. (2002). Time discounting and time preference: A critical review, Journal of Economic Literature, 40(2), 351-401.

Gertler, P. & Boyce, S. (2001). An experiment in incentive-based welfare: The impact of PROGESA on health in Mexico, Unpublished Manuscript University of California, Berkeley.

Harrison, G.W. & List, J. (2004). Field experiments, Journal of Economic Literature, 42(4), 1009-1055.

Hoddinott, J. (2002). Participation and poverty reduction: An analytical framework and overview of the issues, Journal of African Economies, 11(1), 146-168.

Hoffmann, V. Barrett, C. & Just, D.R. (2009). Do free goods stick to poor households? Experimental evidence on insecticide treated mosquito nets, World Development, 37(3), 607-617.

INEI. (2005). Villa El Salvador: Perfil sociodemográfico de las poblaciones en riesgo, Lima Instituto Nacional de Estadísticas.

Isaac, R.M. Schmidtz, D. & Walker, J. (1989). The assurance problem in laboratory markets, Public Choice, 62(3), 217-236.

Jacobsson, F. Johannesson, M. & Borgquist, L. (2007). Is altruism paternalistic?, Economic Journal, 117(520), 761-781.

Kilby, P. (2006). Accountability for empowerment: Dilemmas facing non-governmental organizations, World Development, 34(6), 951-963

Kremer, M. & Miguel, E. (2007). The illusion of sustainability, Quarterly Journal of Economics, 122(3), 1007-1065.

Laibson, D. (1997). Golden eggs and hyperbolic discounting, Quarterly Journal of Economics, 112(2), 443-477.

Ledyard, J.O. (1995). Public goods: A survey of experimental research. In Kagel, J. & Roth, A., eds. Handbook of Experimental Economics, Princeton: Princeton University Press, 111-194.

Mansuri, G. & Rao, V. (2003). Community-based and –driven development: A critical review, World Bank Research Observer, 19(1), 1-39.

Mullainathan, S. (2004), Psychology and development economics, Unpublished Manuscript, Harvard University, Cambridge.

UNFPA & Microcredit Summit Campaign. (2009). Financing healthier lives: Empowering women through integration of microfinance and health education, New York.

Olken, B. (2008). Direct democracy and local public goods: Evidence from a field experiment in Indonesia, NBER Working Paper #14132, Cambridge.

Ostrander, S.A. (2007). The growth of donor control: Revisiting the social relations of philanthropy, Nonprofit and Voluntary Sector Quarterly, 36(2), 356-372.

Rauchdobler, J. Sausgruber, R. & Tyran, J-R. Voting on thresholds for public goods: Experimental evidence, University of Copenhagen Department of Economics Discussion Paper 09-27, Copenhagen.

Rhee, M. Sissoko, M. Perry, S. McFarland, W. Parsonnet, J. & Doumbo, O. (2005). Use of insecticide-treated nets (ITNs) following a malaria education intervention in Piron, Mali: A control trial with systematic allocation of households, Malaria Journal, 35(4).

Riddell, R.C. (2007) Does foreign aid really work?, Oxford University, Oxford.

Rondeau, D. Schulze, W.D. & Poe, G.L. (1999). Voluntary revelation of the demand for public goods using a provision point mechanism, Journal of Public Economics, 72(3), 455-470.

Rondeau, D. & List, J. (2008). Matching and challenge gifts to charity: Evidence from laboratory and natural field experiments, Experimental Economics, 11(3), 253-267.

Stifel, D. H. & Alderman, H. (2006). The “glass of milk” subsidy program and malnutrition in Peru, World Bank Economic Review, 20(3), 421-448.

Swidler, A. Watkins, S. C. (2009). “Teach a man to fish”: The sustainability doctrine and its social consequences, World Development, 37(7), 1182-1196.

Tanaka, T. Camerer, C. & Nguyen, Q. (2006). Poverty, politics, and preferences: Field experiments and survey data from Vietnam, New Economics Papers, Los Angeles.

Wydick, B. Games in economic development, Cambridge University Press, New York