Inequality, Institutions and Cooperation

Research output: Working paperResearch

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-fieldpublic goods experiment with over 1,300 participants across rural Vietnam. Our resultsshow that inequality adversely affects aggregate contributions, and this is on accountof high endowment individuals contributing a significantly smaller share than thosewith low endowments. This negative effect of inequality on cooperation is exacerbatedin high corruption environments. We find that corruption leads to more pessimisticbeliefs about others’ contributions in heterogeneous groups, and this is an importantmechanism explaining our results. In doing so, we highlight the indirect costs of cor-ruption that are understudied in the literature. These findings have implications forpublic policies aimed at resolving local collective action problems.
Original languageEnglish
Number of pages11
Publication statusPublished - 2020
SeriesPublications of the Development Economic Research Group (DERG)
Number03-2020
ISSN2597-1018

ID: 254467997