Discussion Paper Details

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Title: Government versus Private Ownership of Public Goods: Experimental Evidence

Author(s): David J. Kusterer and Patrick W. Schmitz

Publication Date: September 2018

Keyword(s): Incomplete Contracts, Investment incentives, Laboratory experiments, Property rights and Public Goods

Programme Area(s): Industrial Organization

Abstract: Who should own public projects? We report data from a laboratory experiment with 480 participants that was designed to test Besley and Ghatak's (2001) public-good version of the Grossman-Hart-Moore property rights theory. Consider two parties, one of whom can invest in the provision of a public good. The parties value the public good differently. Besley and Ghatak (2001) argue that more investments will be made if the high-valuation party is the owner, regardless of whether or not this party is the investor. While our experimental results provide support for the Grossman-Hart-Moore theory, they cast some doubts on the robustness of Besley and Ghatak's (2001) conclusion.

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Bibliographic Reference

Kusterer, D and Schmitz, P. 2018. 'Government versus Private Ownership of Public Goods: Experimental Evidence'. London, Centre for Economic Policy Research.