Bridging the Great Divide in South Africa: Inequality and Punishment in the Provision of Public Goods

Abstract

We explore the effect of income inequality and peer punishment on voluntary provision of public goods in an experimental context. Our sample draws from nine fishing communities in South-Africa where high levels of inequality prevail. We find that aggregate cooperation is higher in both the voluntary contribution mechanism (VCM) and punishment treatments for unequal groups. Once peer sanctioning is introduced over-contribution by low relative to high endowment players observed in the VCM treatment is significantly enhanced. Demand for punishment by low and high endowment players are similar, irrespective of differences in relative costs, and in unequal groups free-riding is punished more, specifically by low endowment players. We observe inequality aversion both in endowments and with respect to the interaction of endowments and contributions: high endowment players receive more punishment, but also receive more punishment for negative deviation from the group mean share.