The provision of public goods often benefits a larger group than those who can actively provide
the public good. This paper addresses institutional arrangements between subjects who can
provide a public good (insiders) and subjects who also benefit from the public good but cannot
provide it (outsiders). Using laboratory experiments, we compare a setting of passive outsiders
to situations where outsiders can either make unconditional or conditional transfers to the
insiders. The primary behavioral question is to what extent outsiders will use the opportunity to
subsidize the contributions of insiders and how insiders respond to those subsidies. On average,
whether transfers are unconditional or conditional, insiders tend to substitute transfers for
their own contributions. Transfers and contributions to the public good tend to decrease across
decision rounds, leaving provision levels of the public good lower than a baseline condition with
no opportunities for transfers from outsiders.
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