Fairness, Reciprocity and Inequality: Experimental evidence from South Africa

Abstract: This thesis consists of six papers, related to artifactual field experiments, conducted in South Africa. The main focus of the thesis is the effect of different forms of heterogeneity on cooperation and punishment within groups. We conduct public goods experiments where the first study draws on a sample of nine fishing communities in South Africa; the second is conducted in Cape Town amongst four high schools with distinctly different socio-economic profiles. The first paper “Bridging the Great Divide in South Africa: Inequality and Punishment in the Provision of Public Goods” explores the effect of income inequality and peer punishment on cooperation. Aggregate cooperation is higher in both the voluntary contribution mechanism and punishment treatments for unequal groups. Low endowment players also contribute a significantly greater fraction of their endowment to the public good than high endowment players in the presence of punishment. Demands for punishment by low and high endowment players are similar, irrespective of differences in relative costs, and in unequal groups free-riding is punished more, specifically by low endowment players. We observe inequality aversion both in endowments and with respect to the interaction of endowments and contributions. We explicitly examine the impact of heterogeneity in actual per capita household incomes and expenditures of participants on contributions to the public good in the second paper: “Games and Economic Behavior in South African Fishing Communities.” We find that contributions to the public good are increasing in income levels, and income heterogeneity is associated with greater contributions towards the public good, especially by those at the lower end of the income distribution. Racial and gender diversity in groups tends to lower contributions to the public pool. In the third paper “Contributing My Fair Share: Inequality and the Provision of Public Goods in Poor Fishing Communities in South Africa” we consider only the treatments without punishment. We find that aggregate contributions are marginally higher in unequally endowed groups, and that low endowment individuals contribute a significantly larger fraction of their endowments towards the public good than high endowment players. Contributions made by the majority of individuals approximate a proportional fair share threshold. In “Fairness and Accountability: Testing Models of Social Norms in Unequal Communities,” the last paper that forms a part of this project, we advance different behavioral models for fairness. We find that behavior observed in unequal groups does not accord with models of inequality aversion or egocentric altruism. Our empirical results support a proportional reciprocity model rather than a model of absolute reciprocity. Empirical testing of the proportional model enables us to estimate the intrinsic contribution norm for each community. The second part of this thesis involves two essays conducted amongst schools from different social environments in Cape Town. The first “Does Stake Size matter for Cooperation and Punishment?” finds that an increase in stake size does not significantly affect either cooperation or the level of punishment in a one-shot public goods experiment. The second study “Social Capital, Cooperative Behavior and Norm-enforcement” examines the influence of an individual’s social environment on his or her cooperative and norm-enforcement behavior. Our main empirical results clearly confirm that social environment is consistently related with cooperative and norm-enforcement behavior. Moreover, its impact is able to overpower typical group variables.