The Effect of Financial Constraints on In-Group Bias: Evidence from Rice Farmers in Thailand

Abstract

In-group bias can be detrimental for communities and economic development. We study the causal effect of financial constraints on in-group bias in prosocial behaviors – cooperation, norm enforcement, and sharing – among low-income rice farmers in rural Thailand, who cultivate and harvest rice once a year. We use a between-subjects design – randomly assigning participants to experiments either before harvest (more financially constrained) or after harvest. Farmers interacted with either in-group or out-group partners at village level. We find that in-group bias in cooperation and norm enforcement exist only after harvest, that is, when people are less financially constrained.

Keywords: cooperation, financial constraints, in-group bias, lab-in-the-field experiment, norm enforcement

JEL Classification: C93, D64, D91