Inequality, institutions and cooperation

Markussen, Thomas and Sharma, Smriti and Singhal, Saurabh and Tarp, Finn (2021) Inequality, institutions and cooperation. European Economic Review, 138. ISSN 0014-2921

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We examine whether the relationship between economic inequality and voluntary cooperation 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 due to high endowment individuals contributing a significantly smaller share than those with low endowments. This negative effect of inequality on cooperation is stronger in high corruption environments. We find that corruption is associated with pessimistic beliefs about others’ contributions in heterogeneous groups, highlighting 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.

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Journal Article
Journal or Publication Title:
European Economic Review
Additional Information:
This is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, 138, 2021 DOI: 10.1016/j.euroecorev.2021.103842
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27 Jul 2021 13:45
Last Modified:
29 Sep 2023 01:38