Government Intervention and Collective Action: Induced Interaction Can Build Coordination

Abstract

Using a minimum effort game at the onset of a conditional cash transfer in Colombia, we document that increasing exposure time to the intervention is associated with a higher (lower) probability of beneficiaries choosing high (low) effort. We argue that program-induced links between beneficiaries gives rise to a coordination device, which is not mediated by kinship or friendship. Willingness to cooperate does not drive coordination, so the program-induced interaction affects individual expectations and not players’ preferences. However, structural estimates about the level of expectations needed to sustain high effort raise a word of caution about the long-run effect of the intervention.

Keywords: coordination, conditional cash transfer, quantal response equilibrium, level-k, lab-in-the-field, induced interaction