nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2013‒06‒30
eleven papers chosen by
Matthew Baker
City University of New York

  1. Self-selection into Economics Experiments is Driven by Monetary Rewards By Johannes Abeler; Daniele Nosenzo
  2. Inclusive Fitness Maximization : An Axiomatic Approach By Samir Okasha; John A. Weymark; Walter Bossert
  3. The Price of Warm Glow By Lilley, Andrew; Slonim, Robert
  4. Cooperation under Democracy and Authoritarian Norms By Björn Vollan; Yexin Zhou; Andreas Landmann; Biliang Hu; Carsten Herrmann-Pillath
  5. Convergence of best response dynamics in extensive-form games By Xu, Zibo
  6. Co-managing common pool resources: Do formal rules have to be adapted to traditional ecological norms? By Björn Vollan; Sebastian Prediger; Markus Frölich
  7. Religion, Politician Identity and Development Outcomes:Evidence from India By Sonia Bhalotra; Guilhem Cassan; Irma Clots-Figueras; Lakshmi Iyer
  8. Reflections on the Search for Fertility Effects on Happiness By Kravdal, Øystein
  9. Exploitation, Altruism, and Social Welfare: An Economic Exploration By Doepke, Matthias
  10. Culture, Entrepreneurship, and Growth By Doepke, Matthias; Zilibotti, Fabrizio
  11. The endogenous formation of an environmental culture By Ingmar Schumacher

  1. By: Johannes Abeler (School of Economics, University of Oxford); Daniele Nosenzo (School of Economics, University of Nottingham)
    Abstract: Laboratory experiments have become a wide-spread tool in economic research. Yet, there is still doubt about how well the results from lab experiments generalize to other settings. In this paper, we investigate the self-selection process of potential subjects into the subject pool. We alter the recruitment email sent to first-year students, either mentioning the monetary reward associated with participation in experiments; or appealing to the importance of helping research; or both. We find that the sign-up rate drops by two-thirds if we do not mention monetary rewards. Appealing to subjects’ willingness to help research has no effect on signup. We then invite the so-recruited subjects to the laboratory to measure a range of preferences in incentivized experiments. We do not find any differences between the three groups. Our results show that student subjects participate in experiments foremost to earn money, and that it is therefore unlikely that this selection leads to an over-estimation of social preferences in the student population.
    Keywords: Methodology; Selection bias; Laboratory experiment; Field experiment; Otherregarding behavior; Social preferences; Social Approval; Experimenter Demand.
    Date: 2013–03
  2. By: Samir Okasha; John A. Weymark; Walter Bossert
    Abstract: Kin selection theorists argue that evolution in social contexts will lead organisms to behave as if maximizing their inclusive, as opposed to personal, fitness. The inclusive fitness concept allows biologists to treat organisms as akin to rational agents seeking to maximize a utility function. Here we develop this idea and place it on a firm footing by employing a standard decision-theoretic methodology. We show how the principle of inclusive fitness maximization and a related principle of quasi-inclusive fitness maximization can be derived from axioms on an individual’s ‘as if preferences’ (binary choices). Our results help integrate evolutionary theory and rational choice theory, help draw out the behavioural implications of inclusive fitness maximization, and point to a possible way in which evolution could lead organisms to implement it.
    Keywords: Hamilton’s Rule, inclusive fitness, kin selection, rational choice
    Date: 2013
  3. By: Lilley, Andrew (University of Sydney); Slonim, Robert (University of Sydney)
    Abstract: This paper presents a model and experimental evidence to explain the "volunteering puzzle" where agents prefer volunteering time to donating money when monetary donations are, ceteris paribus, more efficient for providing resources to charity. In the model agents receive heterogeneous utility from pure and impure altruism (Andreoni 1989) that permits warm glow to vary between monetary donations and volunteering, thus allowing preferences for impure altruism to rationalize inefficient allocation decisions. We define a measure of the price of impure altruism as the additional proportion of income sacrificed by a donor to give in the dimension that maximizes her utility, holding the overall charitable contribution constant. To test the predictions of the model we ran an experiment in which we varied within-subjects the costs and benefits of monetary and volunteer donations. We also primed between-subjects the emphasis on the donation value to the charity (pure altruism) or the sacrifice to the donor (impure warm-glow altruism). Consistent with the model's predictions, the experiment shows that priming pure altruism increases the efficiency of donation choices, substitutability of donations between money and time and crowding out. Nonetheless, while greater impurity results in a more inefficient allocation of resources, empirically we find it increases overall charitable donations. We discuss the implications of our experimental results for both theory and policy.
    Keywords: altruism, warm glow, volunteering, monetary donations, laboratory experiments
    JEL: D64 D78 H41 C91
    Date: 2013–06
  4. By: Björn Vollan; Yexin Zhou; Andreas Landmann; Biliang Hu; Carsten Herrmann-Pillath
    Abstract: There is ample evidence for a “democracy premium”. Laws that have been implemented via election lead to a more cooperative behavior compared to a top-down approach. This has been observed using field data and laboratory experiments. We present evidence from Chinese students and workers who participated in public goods experiments and a value survey. We find a premium for top-down rule implementation stemming from people with stronger individual values for obeying authorities. When participants have values for obeying authorities, they even conform to non-preferred rule. Our findings provide strong evidence that the efficiency of political institutions depends on societal norms.
    Keywords: Deterrent effect of legal sanctions, expressive law, authoritarian norms, public goods, democratic voting, China
    JEL: A13 C92 D02 D72 H41
    Date: 2013–06
  5. By: Xu, Zibo (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: We prove that, in all finite generic extensive-form games of perfect information, a continuous-time best response dynamic always converges to a Nash equilibrium component. We show the robustness of convergence by an approximate best response dynamic: whatever the initial state and an allowed approximate best response dynamic, the state is close to the set of Nash equilibria most of the time. In a perfect-information game where each player can only move at one node, we prove that all interior approximate best response dynamics converge to the backward induction equilibrium, which is hence the socially stable strategy in the game.
    Keywords: Convergence to Nash equilibrium; games in extensive form; games of perfect information; Nash equilibrium components; best response dynamics; fictitious play; socially stable strategy.
    JEL: C73 D83
    Date: 2013–06–24
  6. By: Björn Vollan; Sebastian Prediger; Markus Frölich
    Abstract: We examine the effectiveness of three democratically chosen rules that alleviate the coordination and cooperation problems inherent in collectively managed common-pool resources. In particular we investigate how rule effectiveness and rule compliance depends on the prevailing local norms and ecological values held by resource users. For this purpose, we employ a framed field experiment that is based on a rangeland model for semi-arid regions and carried out with communal farmers in Namibia and South Africa. Participants could vote for three ‘best practice’ management rules found in many places around the world that are discussed for implementation in the study area: (temporary) private property rights, rotational grazing or limitation of livestock numbers. All rules were designed in a way that facilitated cooperation or coordination of actions. The focus of this study lies on the interactions between these rules and prevalent ecological norms exhibited in the rounds prior to rule implementation. In contrast to previous lab experimental studies, we find that democratic voting of rules is not sufficient for high rule compliance and an overall enhancement in cooperation. Rules turned out to be inefficient if they were in conflict with the prevalent ecological norm.
    Keywords: field laboratory experiment, rule compliance, ecological norms, common-pool resource, adaptive co-management, Southern Africa
    JEL: C71 C92 Q24
    Date: 2013–06
  7. By: Sonia Bhalotra (University of Bristol); Guilhem Cassan (Center for Research in the Economics of Development, University of Namur); Irma Clots-Figueras (Universidad Carlos III de Madrid); Lakshmi Iyer (Harvard Business School)
    Abstract: This paper investigates whether the religious identity of state legislators in India influences development outcomes, both for citizens of their religious group and for the population as a whole. To control for politician identity to be correlated with constituency level voter preferences or characteristics that make religion salient, we use quasi-random variation in legislator identity generated by close elections between Muslim and non-Muslim candidates. We find that increasing the political representation of Muslims improves health and education outcomes in the district from which the legislator is elected. We find no evidence of religious favoritism: Muslim children do not benefit more from Muslim political representation than children from other religious groups.
    Keywords: religion, politician identity, infant mortality, primary education, India, Muslim
    JEL: I15 J13 H41 P16
    Date: 2013–06
  8. By: Kravdal, Øystein (Dept. of Economics, University of Oslo)
    Abstract: There have been many studies of how the number of children in a family affects the parents’ or the children’s lives. One strand of this research focuses on the implications of fertility for the parents’ level of self-reported well-being or happiness. It is argued in this paper that an overall “happiness effect” is not very informative because of the presumably large variation in individuals’ perceived gains from having children. Furthermore, it is explained that such an effect would be difficult to estimate. Most importantly, the highly varying ideas about how a child will affect life quality are important for the decision about whether to have a child. Many of those who have few or no children have chosen this because they think their life will be best this way, and their happiness therefore tells us little about how happy their more fertile counterparts - who to a large extent have other preferences – would have been if they had few or no children. This estimation problem that arises because expectations about the effects of a certain behaviour (here childbearing) are heterogenous, and also affect that very behaviour, is acknowledged in the economics literature, but there is little consciousness about it in the fertility-happiness research. In addition, there is a more “standard” selection problem: factors with implications for childbearing desires, or for the chance of fulfilling these, may also affect or be linked to happiness for other reasons. Unfortunately, even the most advanced statistical approaches that have been used in this research area fail to handle all these problems, so reported results should be interpreted very cautiously.
    Keywords: fertility; happiness; effect heterogeneity; mehod; selection; subjective well-being
    JEL: J13
    Date: 2013–05–21
  9. By: Doepke, Matthias (Northwestern University)
    Abstract: Child labor is often condemned as a form of exploitation. I explore how the notion of exploitation, as used in everyday language, can be made precise in economic models of child labor. Exploitation is defined relative to a specific social welfare function. I first show that under the standard dynastic social welfare function, which is commonly applied to intergenerational models, child labor is never exploitative. In contrast, under an inclusive welfare function, which places additional weight on the welfare of children, child labor is always exploitative. Neither welfare function captures the more gradual distinctions that common usage of the term exploitation allows. I resolve this conflict by introducing a welfare function with minimum altruism, in which child labor in a given family is judged relative to a specific social standard. Under this criterion, child labor is exploitative only in families where the parent (or guardian) displays insufficient altruism towards the child. I argue that this welfare function best captures the conventional concept of exploitation and has useful properties for informing political choices regarding child labor.
    Keywords: child labor, exploitation, social welfare function, altruism
    JEL: D63 D64 J10 J47 J80
    Date: 2013–06
  10. By: Doepke, Matthias (Northwestern University); Zilibotti, Fabrizio (University of Zurich)
    Abstract: We discuss the two-way link between culture and economic growth. We present a model of endogenous technical change where growth is driven by the innovative activity of entrepreneurs. Entrepreneurship is risky and requires investments that affect the steepness of the lifetime consumption profile. As a consequence, the occupational choice of entrepreneurship hinges on risk tolerance and patience. Parents expecting their children to become entrepreneurs have an incentive to instill these two values in their children. Cultural transmission is Beckerian, i.e., parents are driven by the desire to maximize their children's happiness. We also consider, in an extension, a paternalistic motive for preference transmission. The growth rate of the economy depends on the fraction of the population choosing an entrepreneurial career. How many entrepreneurs there are in a society hinges, in turn, on parental investments in children's patience and risk tolerance. There can be multiple balanced-growth paths, where in faster-growing countries more people exhibit an "entrepreneurial spirit." We discuss applications of models of endogenous preferences to the analysis of socio-economic transformations, such as the British Industrial Revolution. We also discuss empirical studies documenting the importance of culture and preference heterogeneity for economic growth.
    Keywords: culture, entrepreneurship, innovation, economic growth, endogenous preferences, intergenerational preference transmission
    JEL: J20 O10 O40
    Date: 2013–06
  11. By: Ingmar Schumacher (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, IPAG - Business School)
    Abstract: We develop an overlapping generations model with environmental quality and endogenous environmental culture. Based upon empirical evidence, preferences over culturally-weighted consumption and envi- ronmental quality are assumed to follow a Leontie function. We fi nd that four diff erent regimes may be possible, with interior or corner solutions in investments in environmental culture and maintenance. Depending on the parameter conditions, there exists one of two possible, asymptotically stable steady states, one with and one without investments in environmental culture. For low wealth levels, society is unable to free resources for environmental culture. In this case, society will only invest in environmental maintenance if environmental quality is suffi ciently low. Once society has reached a certain level of economic development, then it may optimally invest a part of its wealth in developing an environmental culture. Environmental culture has not only a positive impact on environmental quality through lower levels of consumption, but it improves the environment through maintenance expenditure for wealth-environment combinations at which, in a restricted model without environmental culture, no maintenance would be undertaken. Environmental culture leads to a society with a higher indirect utility at steady state in comparison to the restricted model. Our model leads us to the conclusion that, by raising the importance of environmental quality for utility, environmental culture leads to lower steady state levels of consumption and wealth, but higher environmental quality. Thus, for societies trapped in a situation with low environmental quality, investments in culture may induce positive feedback loops, where more culture raises environmental quality which in turn raises environmental culture. We also discuss how en- vironmental culture may lead to an Environmental Kuznets Curve.
    Keywords: environmental culture; overlapping generations model; environment; endogenous preferences.
    Date: 2013–06–14

This nep-evo issue is ©2013 by Matthew Baker. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.