Inequality, Institutions and Cooperation

Thomas Markussen, Smriti Sharma (), Saurabh Singhal and Finn Tarp
Additional contact information
Smriti Sharma: Newcastle University

No 13812, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the effects of randomly introduced economic inequality on voluntary co- operation and whether this relationship is influenced by the quality of local institutions, as proxied by corruption. We use representative data from a large-scale lab-in-the-field public goods experiment with over 1,300 participants across rural Vietnam. Our results show that inequality adversely affects aggregate contributions, and this is on account of high endowment individuals contributing a significantly smaller share than those with low endowments. This negative effect of inequality on cooperation is exacerbated in high corruption environments. We find that corruption leads to more pessimistic beliefs about others' contributions in heterogeneous groups, and this is an important mechanism explaining our results. In doing so, we highlight the indirect costs of corruption that are understudied in the literature. These findings have implications for public policies aimed at resolving local collective action problems.

Keywords: lab-in-field experiment; public goods; corruption; institutions; inequality (search for similar items in EconPapers)
JEL-codes: D73 D90 H41 O12 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2020-10
New Economics Papers: this item is included in nep-sea and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: European Economic Review, 2021, 138, 103842, p.13

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Related works:
Journal Article: Inequality, institutions and cooperation (2021)
Working Paper: Inequality, institutions and cooperation (2020)
Working Paper: Inequality, institutions and cooperation (2020)
Working Paper: Inequality, institutions, and cooperation (2020)
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