Is There a Dividend of Democracy? Experimental Evidence from Cooperation Games
CESifo, Munich, 2023
CESifo Working Paper No. 10616
Do democratically chosen rules lead to more cooperation and, hence, higher efficiency, than imposed rules? To discuss when such a “dividend of democracy” obtains, we review experimental studies in which material incentives remain stacked against cooperation (i.e., free-riding incentives prevail) despite adoption of cooperation-improving policies. While many studies find positive dividends of democracy across a broad range of cooperation settings, we also report on studies that find no dividend. We conclude that the existence of a dividend of democracy cannot be considered a stylized fact. We discuss three channels through which democracy can produce such a dividend: selection, signaling, and motivation. The evidence points to the role of “culture” in conditioning the operation of these channels. Accepting a policy in a vote seems to increase the legitimacy of a cooperation-inducing policy in some cultures but not in others.
Public Choice
Behavioural Economics