Punishment, inequality, and welfare : a public good experiment

This paper reports the results of an experiment that investigates the relationships between inequality and punishment. In particular, we analyze how inter-personal comparisons affect altruistic punishment behavior. In addition, we examine how punishment affects inequality over time. We compare two treatments of a two-stage public good game, one in which costly punishment reduces the immediate payoff inequality between the punisher and the target, and one in which it does not affect the current level of inequality. Our results indicate that subjects punish even when they cannot alter the current distribution of payoffs. We find however that in both treatments, the intensity of punishment increases in the level of inequality. Finally, despite its cost, we show that punishment improves welfare in association with a decrease in the level of inequality over time.