Promoting Cooperation in Collective Actions: Evidence from the Reserve Fund for Maintenance in China

Abstract

Cooperation among group members is the ultimate pursuit in any collective actions. We examine the collective tasks of approving the use of a reserve fund for maintaining facilities covering approximately 5,000 projects and 635 communities in Nanjing, China. In these communities, any maintenance projects that are covered by the Reserve Fund for Maintenance (RFM) need to be approved by the households. Once the RFM is insufficient to cover, households should be notified about the situation and pay in cash by themselves. We focus on the effect of insufficient RFM on the approval rates of maintenance projects. Using an instrumental variable approach, we show that a 1,000 yuan increase in extra cash payment will increase the consent rates of implementing a maintenance plan by approximately 1.04%. Our results suggest that additional information revealed by RFM-uncovered maintenance costs could be a potential mechanism to promote cooperation in making public maintenance decisions by surveying 112 householders involved in the maintenance projects.