nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2011‒02‒26
thirteen papers chosen by
Fabio Sabatini

  1. Spatial versus Social Mismatch: The Strength of Weak Ties By Zenou, Yves
  2. Social Networks and Interactions in Cities By Helsley, Robert W.; Zenou, Yves
  3. The Emergence of Social Structure: Employer Information Networks in an Experimental Labor Market By Klarita Gerxhani; Jordi Brandts; Arthur Schram
  4. Four Essays on Corruption and Cooperation By Schikora, Jan
  5. Social Capital and Savings Behaviour: Evidence from Vietnam By Carol Newman; Finn Tarp; Katleen Van Den Broeck
  6. Social Norm, Costly Punishment and the Evolution to Cooperation By Yu, Tongkui; Chen, Shu-Heng; Li, Honggang
  7. From the lab to the field: Cooperation among fishermen By Stoop, Jan; Noussair, Charles; van Soest, Daan
  8. Learning by observing By Efe Postalci
  9. Emigration and Democracy By Docquier, Frédéric; Lodigiani, Elisabetta; Rapoport, Hillel; Schiff, Maurice
  10. Dialects, Cultural Identity, and Economic Exchange By Falck, Oliver; Heblich, Stephan; Lameli, Alfred; Südekum, Jens
  11. Naïve Beliefs and the Multiplicity of Social Norms By Patel, Amrish; Cartwright, Edward
  12. Happiness and Financial Satisfaction in Israel. Effects of Religiosity , Ethnicity, and War By Bernard M.S. van Praag; Dmitri Romanov; Ada Ferrer-i-Carbonell
  13. Lying and Friendship By Sugato Chakravarty; Yongjin Ma; Sandra Maximiano

  1. By: Zenou, Yves (Stockholm University)
    Abstract: The aim of this paper is to provide a new mechanism based on social interactions explaining why distance to jobs can have a negative impact on workers' labor-market outcomes, especially ethnic minorities. Building on Granovetter's idea that weak ties are superior to strong ties for providing support in getting a job, we develop a model in which workers who live far away from jobs tend to have less connections to weak ties. Because of the lack of good public transportation in the US, it is costly (both in terms of time and money) to commute to business centers to meet other types of people who can provide other sources of information about jobs. If distant minority workers mainly rely on their strong ties, who are more likely to be unemployed, there is then little chance of escaping unemployment. It is therefore the separation in both the social and physical space that prevents ethnic minorities from finding a job.
    Keywords: weak ties, labor market, social networks, land rent
    JEL: A14 J15 R14 Z13
    Date: 2011–02
  2. By: Helsley, Robert W. (University of California, Berkeley); Zenou, Yves (Stockholm University)
    Abstract: We examine how interaction choices depend on the interplay of social and physical distance, and show that agents who are more central in the social network, or are located closer to the geographic center of interaction, choose higher levels of interactions in equilibrium. As a result, the level of interactivity in the economy as a whole will rise with the density of links in the social network and with the degree to which agents are clustered in physical space. When agents can choose geographic locations, there is a tendency for those who are more central in the social network to locate closer to the interaction center, leading to a form of endogenous geographic separation based on social distance. Finally, we show that the market equilibrium is not optimal because of social externalities. We determine the value of the subsidy to interactions that could support the first-best allocation as an equilibrium and show that interaction effort and the incentives for clustering are higher under the subsidy program.
    Keywords: social networks, urban-land use, Bonacich centrality
    JEL: D85 R14 Z13
    Date: 2011–02
  3. By: Klarita Gerxhani (University of Amsterdam); Jordi Brandts (Autonoma University, Barcelona); Arthur Schram (University of Amsterdam)
    Abstract: We use laboratory experiments to investigate how employers develop social structures for sharing information about the trustworthiness of job candidates, when worker opportunism is possible. The experimental data show that substantial information sharing emerges. Two types of information networks are observed. One consists of 'anonymity networks' where information is anonymously and voluntarily provided as a collective good for all employers to use. The other type is a 'reciprocity network' where information sharing is driven by the rewarding of previously given information by the requestor. In both types, the extent of information sharing depends on the costs of providing it. Moreover, information sharing enables employers to recruit trustworthy workers which creates a high quality of trading, benefiting both employer and worker.
    Keywords: Social structure; Information networks; Recruitment; Experiments
    JEL: Z13 J23
    Date: 2011–02–11
  4. By: Schikora, Jan
    Abstract: This dissertation contains four separate studies in the fields of corruption and cooperation. The first chapter explicates the mechanism that links the fractionalization of society with its level of corruption within a theoretical model of relational contracting. The other three chapters describe experimental studies. The second and third chapters evaluate two popular anti-corruption policies, the ‘Four-Eyes-Principle’ and ‘Whistle- Blowing’, with respect to their effectiveness in decreasing the level of corruption and increasing social welfare. The last chapter considers the effect of endowment uncertainty on cooperative behaviour in a linear public goods game and explains it by specific conditional cooperation preferences. Cooperation between decision-making agents is recognized as one of the single most important mechanisms in economic research and represents one of the cornerstones of economic development. Countless economic activities have been analysed with game theoretic models of cooperation. Experimental methods may not only demonstrate the deficiencies of standard economic theory in terms of explanation and predictive power, they may also help to improve existing models. The public goods game (Isaac and Walker 1988) represents one of the most popular vehicles to experimentally analyse cooperative behaviour. It models the dilemma of the opposition between selfish preferences and social efficiency. Numerous experiments have shown that participants behave in a highly cooperative way in situations for which the standard economic theory of rational payoff maximization predicts strictly selfish behaviour. In my view, the most convincing approach to explaining the phenomenon of cooperation is the existence of conditional cooperative behaviour. This links the public goods game to games that are specifically designed to analyze trust and reciprocity, e.g. the gift exchange game (Fehr et al. 1993), the investment game (Berg et al. 1995) and the ultimatum game (Güth et al. 1982). Applications of these games even extend to criminal activities such as corruption. Administrative corruption, defined as ‘the misuse of public power for public gain’ (Klitgaard 1988) is recognized as the ‘single most important obstacle to economic development’ (The World Bank 2008). The key to effective anti-corruption policy with respect to institutional design is the understanding of the determinants, mechanisms and weaknesses of corruption. This demands the analysis of two different levels of cooperation common to most corrupt transactions. Since any corrupt relationship is by definition illegal, the corrupt partners cannot rely on legal third parties, i.e. the courts, to enforce their contracts. The transaction between a client and a corrupt official depends on trust and reciprocity which may be fostered for example by repeated interaction. This kind of cooperation is similar to the mechanism modelled in the gift exchange game. In contrast to the original gift exchange game, where cooperation is efficient with respect to social welfare (measured e.g. in the sum of payoffs to all affected individuals), corrupt reciprocity is socially undesirable due to the reasonable assumption of its strong negative externality to the public (Shleifer and Vishny 1993, Rose-Ackermann 1999). In the case of instable corruption, it would be socially optimal for all agents to stay away from reciprocity and cooperation, and adhere to their selfish rationality. The situation involving all members of a society with respect to their choices for or against corrupt reciprocity can hence be seen as a reverse public goods dilemma in a broader sense. The first chapter focuses on the role of the fractionalization of a society in determining the level of corruption. In a series of empirical cross-country studies social fractionalization, often (crudely) measured by the Ethno-Linguistic Fractionalization Index (ELF, see Appendix 1A) has been identified as an important determinant of the level of corruption measured by the Corruption Perception Index or similar indices (Alesina and Ferrara 2002, Mauro 1995, Bardhan 1997). In a cross regional analysis, providing a more controlled environment, Dincer (2008) finds an inversely U-shaped relationship between the two variables. However, none of these studies provides a model based theoretical explanation for the empirical evidence. As a basis of our analysis we use an infinitely repeated version of a standard, multi stage game of administrative corruption which captures the enforcement problem of the illegal transaction. In order to describe the main mechanism underlying the relationship between the social structure and corruption we define the structure of society in terms of its fractionalization as a vector of separated sub-networks whose members share information. Assuming that clients use simple punishment strategies as devices to maintain corrupt cooperation within relational contracting, we find that the maximum level of corruption is to be expected in societies that consist of a large but not maximal number of small (but not minimal) groups. This is due to the inversely U-shaped relationship between the relative size of a sub-network (measured in the number of group members relative to the size of society) and its members’ ability to stabilize corrupt transactions. The (relative) size of a sub-group has two countervailing effects on the corruption level. On the one hand, the (average) probability of a successful corrupt transaction (expected frequency) increases in the number of group members. This is because the incentives for opportunism decrease due to growing stakes for the official. On the other hand, an increase in the relative sub-group size increases the (personal) costs for the clients through the internalization of a larger part of the negative externality. Thus, necessary compensation of a growing number of peers decreases the profitability of corruption. This chapter provides a model-based explanation of the inversely U-shaped relationship between social fractionalization and corruption found in Dincer (2008). The results of our model are also in line with empirical observations of cross-country comparisons (Gunasekara 2008, La Porta et al. 1999 and Alesina et al. 2003). Our model can be extended to account for considerations of the influence of different types of social capital on corrupt behaviour. Using the standard model of self-interested payoff maximization to analyse the mechanisms that underlie the determinants of corruption may only be reasonable in situations in which limit values and benchmark examinations are considered, and therefore simplifying assumptions such as infinite repetitions are justified. In finitely repeated interaction (or one shot games) of corruption, neither the standard self-interested model nor models of strong reciprocity relying on social preferences such as altruism (Andreoni and Miller 2002), inequity aversion (Fehr and Schmidt 1999) or intentions (Dufwenberg and Kirchsteiger 2004) can provide a consistent explanation or predictions for corrupt behaviour based on cooperation. This and the scarcity of reliable field data complicate any analysis of corruption that aims at deriving policy implications. In order to evaluate the usefulness of proposed anti-corruption measures, or those that are in force, controlled experiments are indispensible to complement empirical studies. The findings of several studies, e.g. Armantier and Boly (2008), demonstrate the external validity of laboratory corruption experiments (Dusek et al. 2004). Following Abbink et al. (2002) with respect to experimental methodology, the second chapter describes an experimental approach to assess one of the most potent countercorruption policy tools, the ‘Four-Eyes-Principle’ (business has to be conducted by at least two individuals, hence four eyes). Although proposed in various reports and lists of recommendations for anti-corruption measures by national and international organizations, it lacks any theoretical or empirical justification (Pörting and Vahlenkamp 1998, Rieger 2005, Wiehen 2005). In our laboratory experiment we replace a single decision-maker with a small group of two officials who decide jointly in the role of the official in order to model the introduction of the ‘Four-Eyes-Principle’. We show that the introduction of the ‘Four-Eyes-Principle’ can lead to an increase rather than a decrease of the level of corruption. This result comes as a surprise when considering predictions from the standard self-interested model alone and ignoring effects stemming from the dynamics of group decision-making. Controlling for effects that are purely driven by differences in marginal incentives (i.e. effects stemming from the splitting of the benefits and costs of corruption between two officials) we find that group decision-making is dominated by the motive of individual (long term) profit maximizing, which has been identified as a main explanation for group decision-making (Kocher and Sutter 2007). Combining data of final choices (outcomes) with evidence from inside the decision-making process (i.e. the dynamics of individual choices), we show that groups follow strategies that foster reciprocity in a more sustainable way than their individual counterparts, which leads to a higher number of successful corrupt transactions. To explain the behavioural characteristics in more detail, we analyse the content of electronic chat messages exchanged during the joint decision-making process. In an average situation of disagreement between two officials, it is the official with the more corrupt agenda who dominates the decisions despite the honest official’s veto power. Since corrupt reciprocity maximizes individual payoffs for the immediate transaction partners, arguments in favour of a strategy that fosters corrupt reciprocity are most persuasive. We interpret this result as support for the Persuasive Argument Theory attributing groups a higher ability to adhere to behaviour that generates maximum individual payoffs (Pruitt 1971). Our results show that the profit maximizing motive may dominate in the group decision-making process even though there is an obvious trade-off with social efficiency. Since they ignore the negative external effects of corruption, groups produce the least desirable outcomes in terms of welfare by their reciprocal behaviour. Against existing policy recommendations, the results of our experiment cast doubt on the usefulness of the introduction of the ‘Four-Eyes-Principle’. This chapter does not only evaluate an anti-corruption measure, it also provides insights into the motivations, within groups and individuals, that underlie strategic decisions in social dilemmas in general and in the dilemma of corruption in particular. The third chapter experimentally assesses the effectiveness of another tool of anticorruption policy. The institutional enabling of whistle-blowing is seen as a powerful measure to contain corrupt activity (Drew 2003). Whistle-blowing is generally defined as ‘the act of disclosing information in the public interest’. Despite its widespread use and perceived success, experimental evidence seems to cast doubt on its usefulness (Abbink 2006, Lambsdorff and Frank 2010, forthcoming). This may be because the analysis of whistle-blowing within the standard set-up of a corrupt transaction accounts for only one aspect of its total effect on social welfare. The standard game of corruption, often used to analyse the effect of a determinant on the frequency of corruption, only considers the direct but not the indirect consequences of corruption on social efficiency. While the direct consequences may be captured by the expected negative externality to the public resulting from a successful corrupt transaction, the indirect consequences include efficiency losses caused by honest clients leaving productive markets because of their fear of being exploited by corrupt officials. Where in the standard game of corruption the official has a passive role with respect to the initiation of a corrupt transaction, we expand the standard model by allowing both sides of the transaction to activate corruption. The symmetry of corrupt engagement enables us to assess the potential effects of the introduction of the opportunity to blow the whistle on the two main negative consequences of corruption. First, whistle-blowing may reduce the negative effect of corruption hindering ‘honest’ clients to engage in productive activity by providing a tool against demanding corrupt officials. Second, whistle-blowing may affect the stability of the corrupt transaction and influence the number of successful deals and hence the amount of realized negative externalities. We find that the total effect of symmetrically punished whistle-blowing (i.e. the punishment is independent of who has blown the whistle) is ambiguous. Confirming the findings of Lambsdorff and Frank (2010) and Abbink (2006), whistle-blowing increases the stability of a corrupt transaction. However we find that it also reduces the effect of corruption deterring productive activity, offering a safeguard for an ‘honest’ client against the extortion by a corrupt official. We demonstrate that asymmetric leniency for the official can offset the negative effect of whistle-blowing. Our results can be explained using simple arguments as to subjects’ belief structures and payoff maximization. Moreover, we find that leniency is especially effective for male officials. The consideration of asymmetric punishment of illegal activities in general and leniency for whistle-blowing in particular should be considered in legislature. Our extended model of corruption provides the basis for experimental research targeting both direct and indirect effects of corruption. While the focus of the first three chapters is on the negative consequences of cooperative behaviour in corruption, the fourth chapter, which is joint work with Johannes Maier, considers socially desirable cooperation. In an experimental public goods game using the Voluntary Contribution Mechanism (Isaac and Walker 1988) we study the effect of uncertainty as to others’ endowments on contribution behaviour. In most applications of public goods provision it is more realistic to assume heterogeneity instead of homogeneity of initial endowments between cooperation partners. The own endowment can be private information, which means that endowment levels of fellow group members can be unknown. In situations of charitable giving, for example, endowments (individual wealth levels) are likely to be heterogeneous and information about them remains private, while information about actual contributions (donations) are often made publicly available. To quantify and explain the effect of endowment uncertainty on cooperative behaviour we use an adapted version of the experimental two-stage approach used by Fischbacher and Gächter (2010). In the first stage of our experiment, subjects had to state their contribution preferences conditional on their group partners’ contributions and endowments. Here we used an incentivized strategy method (Selten 1967). In the second stage, we quantify the effect of uncertainty in a repeated linear public goods game (ten periods) played in partner design with groups of three participants. While subjects knew their own endowment and the endowments of their two group partners in the certainty treatment, they only knew their own endowment, low or high, in the uncertainty treatment. However, they knew that the others were either high or low endowed. When we pool all observations of each treatment, we only find a small negative but insignificant effect of uncertainty on average contribution levels. When we separate observations according to participants’ endowments, we find that subjects with high initial endowments contribute slightly more, while participants with low endowments contribute substantially less under uncertainty. These two opposing effects of uncertainty lead to lower contribution levels in poor and higher contribution levels in rich groups. The inequality in income levels between low and high endowed subjects therefore increases through uncertainty. We explain our treatment effects by two mechanisms, the effect of deviating beliefs and the net effect of (strategic) over-contribution. We attribute both effects to conditional contribution preferences. One of our main results is that subjects are relative conditional contributors. In the context of heterogeneous endowments this means that they contribute more, the lower their group partners’ endowments holding their absolute contributions constant. This and the findings of systematically deviating beliefs explain the former of the two mechanisms. Under uncertainty, low endowed subjects believe that they are in a richer group than they actually are and therefore contribute less in the repeated public goods game than they would have done, had they known the correct endowments of their group partners. High endowed subjects, on the contrary, believe that their group members are poorer on average and hence contribute more. The preference for relative conditional cooperation also explains the treatment differences in (strategic) over-contribution that remains when we subtract the effect of deviating beliefs. The intuition for (strategic) over-contribution is that subjects contribute higher levels in repeated games than their stated preferences should allow in order to trigger positive reciprocity and thereby sustain cooperation (see e.g. Fischbacher and Gächter 2010). In contrast to groups in the certainty treatment and groups consisting of high endowed individuals in the uncertainty treatment, we do not find (strategic) over-contribution in groups of low endowed individuals under uncertainty. We attribute this to their fear of sending the wrong signals (i.e. being high endowed) by making large contributions. This fear may be due to participants’ anticipation of others’ relative conditional cooperation preferences. Overall, the combination of the two mechanisms explains a large fraction of our treatment effects. This paper not only explicates contribution behaviour under uncertainty, it also expands the knowledge of conditional cooperation preferences in general. Its results motivate future research on the theoretical foundations of conditional cooperation. All four chapters contain their own introductions and appendices so they can be read independently.
    Keywords: Experimental Economics Corruption Institutional Economics Cooperation Principal Agent Theory
    Date: 2011–01–27
  5. By: Carol Newman (Institute for International Integration Studies, Trinity College Dublin); Finn Tarp (Department of Economics, University of Copenhagen); Katleen Van Den Broeck (Department of Economics, University of Copenhagen)
    Abstract: We explore the extent to which social capital can play a role in imparting information about the returns to saving where potential knowledge gaps and mistrust exists. Using data from Vietnam we find strong evidence to support the hypothesis that information transmitted via reputable social organizations increases the proportion of liquid assets held in the form of deposits that yield a return. Our results imply that targeting information on the benefits of deposit saving through formal networks or groups would be effective in increasing the number of households that save at grassroots level.
    Keywords: Household Savings, Social Capital, Information Failure, Risk Aversion
    JEL: D14 D71 D83 D91 O12 O16
    Date: 2011–01
  6. By: Yu, Tongkui; Chen, Shu-Heng; Li, Honggang
    Abstract: Both laboratory and field evidence suggest that people tend to voluntarily incur costs to punish non-cooperators. While costly punishment typically reduces the average payoff as well as promotes cooperation. Why does the costly punishment evolve? We study the role of punishment in cooperation promotion within a two-level evolution framework of individual strategies and social norms. In a population with certain social norm, players update their strategies according to the payoff differences among different strategies. In a longer horizon, the evolution of social norm may be driven by the average payoffs of all members of the society. Norms differ in whether they allow or do not allow for the punishment action as part of strategies, and, for the former, they further differ in whether they encourage or do not encourage the punishment action. The strategy dynamics are articulated under different social norms. It is found that costly punishment does contribute to the evolution toward cooperation. Not only does the attraction basin of cooperative evolutionary stable state (CESS) become larger, but also the convergence speed to CESS is faster. These two properties are further enhanced if the punishment action is encouraged by the social norm. This model can be used to explain the widespread existence of costly punishment in human society.
    Keywords: social norm; costly punishment; cooperative evolutionary stable state; attraction basin; convergence speed
    JEL: C02 D64 C73
    Date: 2011–02–01
  7. By: Stoop, Jan; Noussair, Charles; van Soest, Daan
    Abstract: We conduct a field experiment to measure cooperation among groups of recreational fishermen at a privately owned fishing facility. The parameters are chosen so that group earnings are greater when group members catch fewer fish, as in the Voluntary Contributions Mechanism (VCM). In a manner consistent with classical economic theory, though in contrast to prior results from laboratory experiments, we find no evidence of cooperation. We construct a series of additional treatments to identify causes of the di®erence. We rule out the subject pool and the laboratory setting as potential causes, and identify the type of activity involved as the source of the lack of cooperation in our field experiment. When cooperation requires a reduction in fishing effort, individuals are not cooperative, whether the reduction in fishing translates into more money or into more fishing opportunities for the group.
    Keywords: Public Goods Game; Field Experiment; Social Preferences
    JEL: C92 C93 C72
    Date: 2010–09–16
  8. By: Efe Postalci (Department of Economics, Izmir University of Economics)
    Abstract: We introduce a network formation model based on the idea that individuals engage in production (or decide to participate in an action) depending on the similar actions of the people they observe in a society. We differentiate from the classical models of participation by letting individuals to choose, non cooperatively, which agents to observe. Observing behavior of others is a costly activity but provides benefits in terms of reduction in cost of production for the observing agent, which we take it as learning. In this non cooperative setting we provide complete characterization of both Nash stable and socially efficient network configurations. We show that every society can admit a stable network. Moreover, typically there will be multiple stable configurations that will be available for a society. While all stable networks will not be efficient we show that every efficient network will be stable.
    Keywords: Networks; Network formation, Self organization, Stable networks, Nash networks, Participation Games, Learning
    JEL: D85
    Date: 2010–11
  9. By: Docquier, Frédéric (Université catholique de Louvain); Lodigiani, Elisabetta (University of Luxembourg); Rapoport, Hillel (Bar-Ilan University); Schiff, Maurice (World Bank)
    Abstract: Migration is an important and yet neglected determinant of institutions. The paper documents the channels through which emigration affects home country institutions and considers dynamic-panel regressions for a large sample of developing countries. We find that emigration and human capital both increase democracy and economic freedom. This implies that unskilled (skilled) emigration has a positive (ambiguous) impact on institutional quality. Simulations show an impact of skilled emigration that is generally positive, significant for a few countries in the short run and for many countries in the long run once incentive effects of emigration on human capital formation are accounted for.
    Keywords: migration, institutions, democracy, diaspora effects, brain drain
    JEL: O1 F22
    Date: 2011–02
  10. By: Falck, Oliver; Heblich, Stephan; Lameli, Alfred; Südekum, Jens
    Abstract: We study the effect of cultural ties on economic exchange using a novel measure for cultural identity: dialect similarity across regions of the same country. We evaluate linguistic micro-data from a unique language survey conducted between 1879 and 1888 in about 45,000 German schools. The recorded geography of dialects comprehensively portrays local cultural ties that have been evolving for centuries, and provides an ideal opportunity to measure cul-tural barriers to economic exchange. In a gravity analysis, we then show that cross-regional migration flows in the period 2000-2006 are positively affected by historical dialect similari-ty. Using different empirical strategies, we show that this finding indicates highly time-persistent cultural borders that impede economic exchange even at a fine geographical scale.
    Keywords: Germany; Gravity; Internal migration; Culture; Language; Dialects
    Date: 2011–01
  11. By: Patel, Amrish (Department of Economics, School of Business, Economics and Law, Göteborg University); Cartwright, Edward (Department of Economics, University of Kent)
    Abstract: In a signalling model of conformity, we demonstrate that naïve observers, those that take actions at face value, constrain the set of actions that can possibly be social norms. With rational observers many actions can be norms, but with naïve observers only actions close to that preferred by the ideal type can be norms. We suggest, therefore, that the naïvety or inexperience of observers is an important determinant of norms and how they evolve.<p>
    Keywords: Signalling; Conformity; Social Norms; Naïve Beliefs
    JEL: D82 D83 Z13
    Date: 2011–02–18
  12. By: Bernard M.S. van Praag (University of Amsterdam, IZA, CESifo, DIW); Dmitri Romanov (Central Bureau of Statistics, Jerusalem, Israel); Ada Ferrer-i-Carbonell (Institut d'Analisi Economica (IAE-CSIC), Barcelona, Spain and IZA)
    Abstract: We analyze individual satisfaction with life as a whole and satisfaction with the personal financial situation for Israeli citizens of Jewish and Arab descent. Our data set is the Israeli Social Survey (2006). We are especially interested in the impact of the religions Judaism, Islam and Christianity, where we are able to differentiate between individuals who vary in religiosity between secular and ultra-orthodox. We find a significant effect of religiosity on happiness. With respect to Jewish families it is most striking that the impact of family size on both life and financial satisfaction seems to vary with religiosity. This might be a reason for differentiation in family equivalence scales. For Arab families we did not find this effect. First-generation immigrants are less happy than second-generation immigrants, while there is no significant difference between second-generation families and native families. The effect of the Lebanon War is much less than expected.
    Keywords: Happiness; subjective well-being; financial satisfaction; Israel; religion; immigration; terrorism
    JEL: H56 I31 N35 N45 R23 Z12
    Date: 2010–09–16
  13. By: Sugato Chakravarty (Purdue University); Yongjin Ma (Purdue University); Sandra Maximiano (Purdue University)
    Abstract: The goal of this paper is to investigate the interaction between social ties and deceptive behavior within an experimental setting. To do so, we implement a modified sender-receiver game in which a sender obtains a private signal regarding the value of a state variable and sends a message related to the value of this state variable to the receiver. The sender is allowed to be truthful or to lie about what he has seen. The innovation in our experimental design lies in the fact that, in contrast to the extant sender-receiver games, the receiver can take no action – which eliminates strategic deception. A further innovation lies in the fact that subjects (i.e., senders) are not restricted to choose between truth telling and a unique type of lie but, instead, are allowed to choose from a distinct set of allocations that embodies a multi-dimensional set of potential lies. Our experimental design is, therefore, able to overcome an existing identification problem by allowing us to disentangle lying aversion from social preferences. We implement two treatments: one in which players are anonymous to each other (strangers); and one in which players know each other from outside the experimental laboratory (friends). We find that individuals are less likely to lie to friends than to strangers; that they have different degrees of lying aversion and that they lie according to their social preferences. Pro-social individuals appear to be more lying averse. If they lie, however, they are equally likely to do so with friends and strangers. The deceptive behavior of selfish individuals mimics those of pro social types only when subjects play with friends. Overall, in addition to social preferences, friendship appears to be an important factor in improving our understanding of deceptive behavior.
    Keywords: Lying, Friendship, social ties, deceptive behavior, signal, experiment
    JEL: G21 D82 O16
    Date: 2011–02

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