We, the Rich: Inequality, Identity and Cooperation in Complex Societies

Abstract

Inequality not only generates status differentials between rich and poor individuals, it also generates status differentials between groups of different composition and income level. We organise the social structure within which groups are embedded to directly manipulate the processes of categorization, identification and comparison to induce weaker or stronger group identities. How well individuals cooperate within each of such groups will ultimately determine the degree of cooperativeness within the whole society. We find that the impact of inequality on social cooperativeness is as complex as is the social structure itself: cooperation varies with the strength of the group's identity as predicted by social identity theory. In particular, high endowment homogeneous groups cooperate most and increasingly over time. Low endowment homogeneous groups display intermediate levels of cooperation. Heterogeneous groups cooperate least, a result driven by lack of cooperation on behalf of the rich. When comparing with an analogous fully homogeneous society, we show that the resulting net impact of inequality on social cooperation is not obvious.

Keywords: experiment, inequality, multiple groups, public goods, social identity

JEL Classification: C91, H49