The effects of centralized power and institutional legitimacy on collective action

Most observed institutional arrangements, in governments, firms, and other organizations, acknowledge the effectiveness of imposing sanctioning institutions and monitoring policies to achieve particular goals. However, less attention has been paid to the influences of the delegation mechanism of sanctioning power. In particular, it remains unclear whether the mechanism influences the legitimacy of the authority/institution, in centralized institutional arrangements. We report laboratory-experimental results of a public goods game that compare the performance of exogenous (i.e., the Leviathan) versus endogenous (i.e., the Democracy) delegation of sanctioning power. Observed differences are not statistically significant, regardless of the effectiveness of sanctions imposed, tested in two experiments with different punishment/cost functions. Democratic schemes in centralized power environments should not be taken for granted. Experimental evidence contradicts the common belief of a robust causal relationship between indirect democratic institutions, collective action, and economic outcomes.