Heterogeneity, Returns To Scale and Collective Action

The paper considers the problem of collective action in an economy with heterogeneous agents. It analyses the effects of resource inequality, valuation heterogeneity, and group size on the expected total provision level of pure public goods with increasing or decreasing returns to scale in production. I find that higher average resource and valuation levels among the agents lead to higher provision. Higher resource inequality can result in higher expected provision when the mean resource level is relatively low and lower expected provision when the mean resource level is high. A similar result holds for agents’ valuations of the public good. Group size is found to have an unambiguously positive effect on the total expected provided amount but a negative effect on per capita contribution under decreasing returns which leads to a higher relative level of free-riding. In contrast, a higher number of agents leads to less free-riding in equilibrium under increasing returns to scale in the public good production. ∗Comments from Maitreesh Ghatak, Philip Reny and participants in the theory and development working group at the University of Chicago are gratefully acknowledged.