Abstract

Since the publication of Olson’s (1965) The Logic of Collective Action, the exploitation hypothesis, in which the rich shoulder the provision burden of public goods for the poor, has held sway despite empirical exceptions. To address such exceptions, we establish two alternative exploitation hypotheses based on contributors’ asymmetric preferences or on their productivity differences regarding the public good. The classic hypothesis and its two variants are proven in a novel fashion. For asymmetric preferences, we also establish the exploitation hypothesis for the joint products model with private and public co-benefits. Our theoretical insights are then illustrated by some empirical examples from the field of international public goods, such as military defense and cross-border pollution.

Highlights

  • Beginning with Olson (1965), the ‘‘exploitation hypothesis’’ has been of recurrent interest in the theory of public goods

  • Our theoretical insights are illustrated by some empirical examples from the field of international public goods, such as military defense and cross-border pollution

  • The three versions are obtained by assuming that the agents or contributors differ only with respect to endowment levels, or preferences, or productivities, while they are homogenous in terms of the other two properties

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Summary

Introduction

Beginning with Olson (1965), the ‘‘exploitation hypothesis’’ has been of recurrent interest in the theory of public goods (see, e.g., Boadway and Hayashi 1999; Cornes and Sandler 1996; Ihori et al 2014; Pecorino 2015; Sandler 1992).

The framework
Three versions of the exploitation hypothesis
Illustration of the three cases
Interaction of the partial effects
Findings
Some empirical applications
Full Text
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