Why are heterogeneous communities inefficient? Theory, history, and an experiment

David Hugh-Jones and Carlo Perroni

No 15-08, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: We examine why heterogenous communities may fail to provide public goods. Current work characterizes sanctioning free-riders as an under-supplied public good. We argue that often free-riders can be punished by the coordinated action of a group. This punishment can be profitable, and need not be undersupplied. But the power to expropriate defectors can also be used to expropriate outgroups. Heterogenous societies may be inefficient because minorities, rather than free-riders, are expropriated. Even if this is not so, groups’ different beliefs about the reasons for expropriation may make the threat of punishment less effective at preventing free-riding. We illustrate our theory with evidence from California mining camps, contemporary India, and US schools. In a public goods experiment using minimal groups and a profitable punishment institution, outgroups were more likely to be punished, and reacted differently to punishment than in group members.

Keywords: group coercion; social heterogeneity (search for similar items in EconPapers)
JEL-codes: D02 H1 H4 N4 (search for similar items in EconPapers)
Date: 2015-04-02
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-exp, nep-his, nep-hpe and nep-soc
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Working Paper: Why are heterogenous communities inefficient? Theory, history and an experiment (2015)
Working Paper: Why are heterogeneous communities inefficient? Theory, history and an experiment (2015)
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