Fairness, Reciprocity and Inequality: Experimental evidence from South Africa

Abstract

This thesis consists of six papers, related to artifactual field experiments, conducted in\nSouth Africa. The main focus of the thesis is the effect of different forms of\nheterogeneity on cooperation and punishment within groups. We conduct public goods\nexperiments where the first study draws on a sample of nine fishing communities in\nSouth Africa; the second is conducted in Cape Town amongst four high schools with\ndistinctly different socio-economic profiles.\nThe first paper “Bridging the Great Divide in South Africa: Inequality and\nPunishment in the Provision of Public Goods” explores the effect of income inequality\nand peer punishment on cooperation. Aggregate cooperation is higher in both the\nvoluntary contribution mechanism and punishment treatments for unequal groups. Low\nendowment players also contribute a significantly greater fraction of their endowment to\nthe public good than high endowment players in the presence of punishment. Demands\nfor punishment by low and high endowment players are similar, irrespective of\ndifferences in relative costs, and in unequal groups free-riding is punished more,\nspecifically by low endowment players. We observe inequality aversion both in\nendowments and with respect to the interaction of endowments and contributions.\nWe explicitly examine the impact of heterogeneity in actual per capita household\nincomes and expenditures of participants on contributions to the public good in the\nsecond paper: “Games and Economic Behavior in South African Fishing\nCommunities.” We find that contributions to the public good are increasing in income\nlevels, and income heterogeneity is associated with greater contributions towards the\npublic good, especially by those at the lower end of the income distribution. Racial and\ngender diversity in groups tends to lower contributions to the public pool.\nIn the third paper “Contributing My Fair Share: Inequality and the Provision of\nPublic Goods in Poor Fishing Communities in South Africa” we consider only the\ntreatments without punishment. We find that aggregate contributions are marginally\nhigher in unequally endowed groups, and that low endowment individuals contribute a\ni\nsignificantly larger fraction of their endowments towards the public good than high\nendowment players. Contributions made by the majority of individuals approximate a\nproportional fair share threshold.\nIn “Fairness and Accountability: Testing Models of Social Norms in Unequal\nCommunities,” the last paper that forms a part of this project, we advance different\nbehavioral models for fairness. We find that behavior observed in unequal groups does\nnot accord with models of inequality aversion or egocentric altruism. Our empirical\nresults support a proportional reciprocity model rather than a model of absolute\nreciprocity. Empirical testing of the proportional model enables us to estimate the\nintrinsic contribution norm for each community.\nThe second part of this thesis involves two essays conducted amongst schools from\ndifferent social environments in Cape Town.\nThe first “Does Stake Size matter for Cooperation and Punishment?” finds that an\nincrease in stake size does not significantly affect either cooperation or the level of\npunishment in a one-shot public goods experiment.\nThe second study “Social Capital, Cooperative Behavior and Norm-enforcement”\nexamines the influence of an individual’s social environment on his or her cooperative\nand norm-enforcement behavior. Our main empirical results clearly confirm that social\nenvironment is consistently related with cooperative and norm-enforcement behavior.\nMoreover, its impact is able to overpower typical group variables.

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