Breaking the norm: An empirical investigation into the unraveling of good behavior
Authors: Ruth Vargas Hill, Eduardo Maruyama, and Angelino Viceisza
Paper forthcoming in Journal of Development Economics
A previous version of this paper appeared as IFPRI Discussion Paper 948
We present results from an artefactual field experiment conducted in rural Peru that considers whether observing non-reciprocal behavior influences an individual’s decision to reciprocate. Specifically, we consider the behavior of second movers in a trust game, assessing whether their decision to reciprocate is influenced by the observed reciprocity of others. In documenting the impact of an external shock to observed reciprocity, this paper shows that small increases in non-reciprocal behavior result in an unraveling of the norm of reciprocity. Survey data is used to explore mechanisms by which this occurred. Results are not consistent with learning effects, suggesting that preferences may be changed by observing others deviating from a norm of reciprocity. These results suggest that investing in encouraging trustworthy behavior can have large benefits in situations where individuals are observing each other’s behavior, such as may be the case in a new market institution.
A field experiment on the impact of weather shocks and insurance on risky investment
Authors: Ruth Vargas Hill and Angelino Viceisza
Paper forthcoming in Experimental Economics
A previous version of this paper appeared as IFPRI Discussion Paper 974
We conduct a framed field experiment in rural Ethiopia to test the seminal hypothesis that insurance provision induces farmers to take greater, yet profitable, risks. Farmers participated in a game protocol in which they were asked to make a simple decision: whether or not to purchase fertilizer and if so, how many bags. The return to fertilizer was dependent on a stochastic weather draw made in each round of the game. In later rounds a random selection of farmers made this decision in the presence of a stylized weather-index insurance contract. Insurance was found to have some positive effect on fertilizer purchases. Purchases were also found to depend on the realization of the weather in the previous round. We explore the mechanisms of this relationship and find that it may be the result of both changes in wealth weather brings about, and changes in perceptions of the costs and benefits to fertilizer purchases.
To remit, or not to remit: that is the question. A remittance field experiment
Authors: Máximo Torero and Angelino Viceisza
We conduct a remittance field experiment among Salvadoran migrants in the metro DC area. Migrants need to decide whether or not to remit funds to a recipient in El Salvador and if so how much. We maintain a (2x2) design in which the remittance budget has a value of $400 or $200, and the remitted funds arrive as cash or grocery vouchers that are non-transferable and applicable to basic necessities that do not include alcohol and cigarettes. Each migrant is randomly allocated to one of the resulting four treatments. We test across these treatments whether control over remittance spending in the form of grocery vouchers affects remittance behavior. We find the following. (1) Migrants send similar proportions across groceries and cash, regardless of the budget size. Qualitative reports suggest that migrants have a preference for a flexible form of ‘control’ that can be used for other expenditures in addition to groceries. (2) These effects are not robust to disaggregation by gender. (a) Male migrants have a preference for cash when the remittance budget is $400, but not when it is $200. (b) Female migrants have a similar preference for cash and groceries, regardless of the remittance budget. (3) Using survey data we explore potential mechanisms. Our effects are consistent with a framework in which migrants exhibit altruism that is conditional on grocery spending, but only up to a certain point. They suggest that male migrants have a lower threshold for satiation and are in line with previous development and experimental literatures that find gender differences in preferences and decision-making. Some policy implications are discussed.
Comprehension and risk elicitation in the field: Evidence from rural Senegal
Authors: Gary Charness (UCSB) and Angelino Viceisza
A previous version of this paper appeared as IFPRI Discussion Paper 1135
In the past decade, it has become increasingly common to use simple laboratory games and decision tasks as a device for measuring both the preferences and understanding of rural populations in the developing world. This is vitally important for policy implementation in a variety of areas. In this paper, we report the results observed using three distinct risk elicitation mechanisms, using samples drawn from the rural population in Senegal, West Africa. Whatever the intellectual merits of a particular elicitation strategy, there is little value in performing such tests if the respondents do not understand the questions involved. We test the understanding of and the level of meaningful responses to the typical Holt-Laury task, to a simple binary mechanism pioneered by Gneezy and Potters in 1997 and adapted by Charness and Gneezy in 2010, and to a nonincentivized willingness-to-risk scale à la Dohmen et al. We find a disturbingly low level of understanding with the Holt-Laury task and an unlikely-to-be-accurate pattern with the willingness-to-risk question. On the other hand, the simple binary mechanism produces results that closely match the patterns found in previous work, although the levels of risk-taking are lower than in previous studies. Our study is a cautionary note against utilizing either sophisticated risk-elicitation mechanisms at the possible cost of seriously diminished levels of comprehension or nonincentivized questions in the rural developing world.
Potential collusion and trust: Evidence from a field experiment in Vietnam
Authors: Máximo Torero and Angelino Viceisza
A previous version of this paper appeared as IFPRI Discussion Paper 1100
In a typical contract farming arrangement, a firm contracts a farmer to deliver a certain quantity-quality combination of a product at a certain point in time for payment at a specified price based on quality attributes. These arrangements tend to be subject to lack of ‘trust’ on both sides since they are typically subject to asymmetric information because quality attributes are unobservable and costly to assess. We conduct variants of framed trust games using contract dairy farmers in Vietnam as first movers to assess (1) baseline trust between these farmers and the firm that contracts them and (2) the impact of potential collusion between the firm and a third party on trust. While farmers are more likely to trust in the presence of the third party, potential collusion does not seem to reduce their propensity to trust. This latter treatment effect is not robust to gender however. Female famers are less likely to trust in the presence of potential collusion relative to male farmers. These gender-specific findings are consistent with the view that women’s social preferences are more context-specific than men’s (as posited by previous studies on gender differences in preferences and decision-making) and can have implications for policy design.