Cross-Racial Envy and Underinvestment in South Africa

29 Pages Posted: 10 Mar 2006

See all articles by Daniel Haile

Daniel Haile

Tilburg University

Abdolkarim Sadrieh

University of Magdeburg

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: February 2006


Trust games are employed to investigate the effect of heterogeneity in income and race on cooperation in South Africa. The amount of socio-economic information available to the subjects about their counterparts is varied. No significant behavioural differences are observed, when no such information is provided. However, when the information is available, it significantly affects individual trust behaviour. The low income subjects from both racial groups invest significantly less in partnerships with the high income subjects of the other racial group than in any other partnership. We attribute this behaviour to cross-racial envy, which on aggregate may lead to substantial underinvestment in the economy.

Keywords: trust game, ethnic diversity, income inequality, cooperation

JEL Classification: C91, J15

Suggested Citation

Haile, Daniel and Sadrieh, Abdolkarim and Verbon, Harrie A. A., Cross-Racial Envy and Underinvestment in South Africa (February 2006). CESifo Working Paper Series No. 1657, Available at SSRN: or

Daniel Haile

Tilburg University ( email )

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE

Abdolkarim Sadrieh

University of Magdeburg ( email )

Faculty of Economics and Management
Postbox 4120
39016 Magdeburg


Harrie A. A. Verbon (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

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