Inequality, Institutions and Cooperation

54 Pages Posted: 2 Nov 2020

See all articles by Thomas Markussen

Thomas Markussen

University of Copenhagen - Department of Economics

Smriti Sharma

Dayalbagh Educational Institute, Dayalbagh, Agra, India

Saurabh Singhal

United Nations - World Institute for Development Economics Research (UNU/WIDER)

Finn Tarp

University of Copenhagen - Department of Economics

Multiple version iconThere are 2 versions of this paper

Abstract

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-field public goods experiment with over 1,300 participants across rural Vietnam. Our results show that inequality adversely affects aggregate contributions, and this is on account of high endowment individuals contributing a significantly smaller share than those with low endowments. This negative effect of inequality on cooperation is exacerbated in high corruption environments. We find that corruption leads to more pessimistic beliefs about others' contributions in heterogeneous groups, and this is an important mechanism explaining our results. In doing so, we highlight the indirect costs of corruption that are understudied in the literature. These findings have implications for public policies aimed at resolving local collective action problems.

Keywords: inequality, institutions, corruption, public goods, lab-in-field experiment

JEL Classification: H41, D73, D90, O12

Suggested Citation

Markussen, Thomas and Sharma, Smriti and Singhal, Saurabh and Tarp, Finn, Inequality, Institutions and Cooperation. IZA Discussion Paper No. 13812, Available at SSRN: https://ssrn.com/abstract=3722392 or http://dx.doi.org/10.2139/ssrn.3722392

Thomas Markussen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Smriti Sharma

Dayalbagh Educational Institute, Dayalbagh, Agra, India ( email )

Department of Accountancy & Law
Faculty of Commerce
Agra, UT Uttar Pradesh 282110
India

Saurabh Singhal

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

HOME PAGE: http://www.wider.unu.edu/aboutus/people/resident-researchers/en_GB/Saurabh-Singhal/

Finn Tarp

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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