Income Heterogeneity in the Voluntary Provision of Dynamic Public Goods

Abstract

This paper explores the effect of income inequality on the voluntary contributions to a dynamic public good. We find that income heterogeneity has a significant impact both on contributions and welfare. The results show that the often observed decay of cooperation does not carry over to the asymmetric environment considered in this study. Our results also suggest that subjects in each income class make different contribution amounts in an absolute sense and give the same percentage of their income. Moreover, we find that contributions of individuals with the same endowment are sensitive to how heterogeneous the environment is.