| Abstract: |
Sometimes people, when comparing themselves with others, take a host of
actions that are destructive to those around them, even when these actions
imply self-inflicted costs. "Pulling down" other more successful individuals
may have both direct and indirect detrimental effects on productivity and
efficiency. On one hand, welfare is reduced directly as output is destroyed,
and indirectly if their threat induces ex-ante behavioral responses in the
form of lower levels of effort and investment. Consequently, linking reactions
to upward social comparisons and their effect on effort levels may help
explain the considerable variability in how people have been shown to react to
such comparisons. In this paper, I develop a two-stage, two-agent model of
strategic behavior that integrates the role of inter-personal comparisons with
conventional neoclassical economic preference theory to analyze how
interpersonal comparisons lead to destructive behavior and affect levels of
effort. The experiment, designed to test the predictions of the model and
tease out the mechanisms that drive destructive behavior, builds on the
two-stage "money burning" game. The experimental games were carried out in
Bolivia among 285 dairy farmers. Results show that people that were above the
within-group mean, in average exert less effort when comparing themselves with
others (the "guilt" case); while people below the within-group mean exert more
effort (the "keep-up-with-the-Joneses" case). People who fear the envy of
others decrease their effort exerted, specially if they are highly ranked.
Results from the money burning game show that people below the mean took in
average more destructive behavior than people above the mean. Of all the
participants, 55% took at least one destructive action against somebody in
their group reducing their output by 34%. People seem to be averse to
disadvantageous inequalities, but not averse to advantageous inequalities.
Moreover, people destroy less the bigger the advantageous difference is but
destroy more in the oposite case. |
| Keywords: |
Interpersonal comparisons, Destructive behavior, Envy, Equity, Equality, Institutional and Behavioral Economics, D01, D03, D63, |