Voluntary versus Compulsory Solidarity: Theory and Experiment

Authors: Güth, Werner; Sutter, Matthias; Verbon, Harrie

Source: Journal of Institutional and Theoretical Economics JITE, Volume 162, Number 2, June 2006 , pp. 347-363(17)

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Abstract:

We present an overlapping-generations model with two interacting teams, where young team members earn an income, whereas old team members depend on either intrateam transfers from young members (voluntary solidarity) or tax-financed transfers (compulsory solidarity). We derive the individually and team-specifically optimal decisions and present further behavioral hypotheses, including the crowding out of voluntary by compulsory solidarity. We test our hypotheses in an experimental study and examine (1) whether raising taxes crowds out voluntary transfers, (2) how income distributions influence voluntary and compulsory solidarity, and (3) whether participants prefer more to less compulsory solidarity.

Document Type: Research article

DOI: http://dx.doi.org/10.1628/093245606777583503

Publication date: 2006-06-01

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Founded as Zeitschrift f�r die gesamte Staatswissenschaft in 1844.

As one of the oldest journals in the field of political economy, the Journal of Institutional and Theoretical Economics (JITE) deals traditionally with the problems of economics, social policy, and their legal framework. JITE is listed in the Journal of Economic Literature, the Social Science Citation Index, the International Bibliography of the Social Sciences, and COREJ.
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