Do People Invest in Local Public Goods with Long-Term Benefits? Experimental Evidence from a Shanty Town in Peru

Do People Invest in Local Public Goods with Long-Term Benefits? Experimental Evidence from a Shanty Town in Peru Thomas de Hoop1, Luuk van Kempen1 and Ricardo Fort2 1Centre for International Development Issues Nijmegen (CIDIN) 2Grupo de Análisis para el Desarrollo (GRADE) Abstract This paper discusses voluntary contributions to health education in a shanty town in Peru, using a new experimental setup to identify voluntary contributions to local public goods. The experiment enables individuals to contribute to a health education meeting, which will only continue if the cumulative investment level exceeds a certain threshold value. Individuals contributed a substantial amount of money, despite the long-term nature of the health benefits of health education. High discount rates only seem to have had a detrimental effect on investment in a poorer subsample. Results from a complementary experiment, to identify donations to a nutrition program, suggest that positive beliefs about short-term learning benefits of health education have played an important role in the investment decision.