Spite and Development

14 Pages Posted: 20 Apr 2016

See all articles by Ernst Fehr

Ernst Fehr

University of Zurich - Department of Economics

Karla Hoff

World Bank - Development Economics Group (DEC); World Bank - Development Research Group (DECRG)

Mayuresh Kshetramade

University of Texas at Austin - Department of Economics

Date Written: May 1, 2008

Abstract

In a wide variety of settings, spiteful preferences would constitute an obstacle to cooperation, trade, and thus economic development. This paper shows that spiteful preferences - the desire to reduce another's material payoff for the mere purpose of increasing one's relative payoff - are surprisingly widespread in experiments conducted in one of the least developed regions in India (Uttar Pradesh). In a one-shot trust game, the authors find that a large majority of subjects punish cooperative behavior although such punishment clearly increases inequality and decreases the payoffs of both subjects. In experiments to study coordination and to measure social preferences, the findings reveal empirical patterns suggesting that the willingness to reduce another's material payoff - either for the sake of achieving more equality or for the sake of being ahead - is stronger among individuals belonging to high castes than among those belonging to low castes. Because extreme social hierarchies are typically accompanied by a culture that stresses status-seeking, it is plausible that the observed social preference patterns are at least partly shaped by this culture. Thus, an exciting question for future research is the extent to which different institutions and cultures produce preferences that are conducive or detrimental to economic development.

Keywords: Economic Theory & Research, Access to Finance, Debt Markets, Bankruptcy and Resolution of Financial Distress, Gender and Social Development

Suggested Citation

Fehr, Ernst and Hoff, Karla and Kshetramade, Mayuresh, Spite and Development (May 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1149122

Ernst Fehr (Contact Author)

University of Zurich - Department of Economics ( email )

BlĂĽmlisalpstrasse 10
Zuerich, 8006
Switzerland
+41 1 634 3709 (Phone)
+41 1 634 4907 (Fax)

Karla Hoff

World Bank - Development Economics Group (DEC) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/khoff

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Mayuresh Kshetramade

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

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