Template-Type: ReDIF-Paper 1.0
Author-Name: Thomas Markussen
Author-Name-First: Thomas
Author-Name-Last: Markussen
Author-Name: Smriti  Sharma
Author-Name-First: Smriti 
Author-Name-Last: Sharma
Author-Name: Saurabh Singhal
Author-Name-First: Saurabh
Author-Name-Last: Singhal
Author-Name: Finn Tarp
Author-Name-First: Finn
Author-Name-Last: Tarp
Title: Inequality, institutions and cooperation
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 nd 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.
Creation-Date: 2020
File-URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2020_023.pdf
File-Format: application/pdf
Number: 309239622
Classification-JEL: H41, D73, D90, O12
Keywords: Inequality, institutions, corruption, public goods, lab-in-field experiment
Handle: RePEc:lan:wpaper:309239622