Public Choice

, Volume 156, Issue 1–2, pp 253–284 | Cite as

Endogenous institutions and the possibility of reverse crowding out

  • R. Mark Isaac
  • Douglas A. Norton

“What institution of government could tend so much to promote the happiness of mankind as the general prevalence of wisdom and virtue? All government is but an imperfect remedy for the deficiency of these.” (Adam Smith 1759)


When government provision of public goods reduces the level of private provision of those same goods, a process of “crowding out” has taken place. The theoretical channel by which crowding out may occur was introduced many years ago (Bergstrom et al. 1986). And, even though there seems little doubt as an empirical matter that crowding out exists, the empirical evidence differs widely in scale. Field studies include Payne (1998), Hungerman (2005), and Hungerman (2009). Laboratory economics experiments (Andreoni 1993; Chan et al. 2002; and Eckel et al. 2005) also have detected intermediate levels of crowding out. The experimental design presented here, however, tests a different phenomenon we call “reverse crowding out.” We define a formal version,...


Public Good Median Voter Voluntary Contribution Public Good Provision Private Provision 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



The authors gratefully acknowledge the support of the John and Hallie Quinn Eminent Scholar Chair, the Charles Koch Foundation, and the National Science Foundation (SES-0451970). We would like to thank participants at the University of Arizona conference in honor of Vernon Smith, the 2008 Conference on Social Dilemmas (held at Florida State University) and the 2008 APEE and SEA meetings for many helpful comments. We are indebted to Peter Leeson, William Shughart, Andrew Smyth, Anna Gunnthorsdottir, Laura Razzolini, and anonymous referees for many helpful comments, to Glenn Dutcher for the programming, using Z-Tree (Fischbacher 2007), and to Sean Collins for assistance in conducting the experiments. The ORSEE system of Greiner (2004) was used in subject recruiting. We are alone responsible for any remaining errors.


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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Dept. of EconomicsFlorida State UniversityTallahasseeUSA

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