We report results from a corruption experiment with Indonesian public servants and Indonesian students. Our results suggest that the Indonesian public servant subjects have a significantly lower tolerance of corruption than the Indonesian students. We find no evidence that this is due to a selection effect. The reasons given by the subjects for their behaviour suggest that the differences in behavior across the subject pools are driven by their different real life experiences. For example, when abstaining from corruption, public servants more often cite the need to reduce the social costs of corruption as a reason for their actions, and when engaging in corruption, they cite low government salaries or a belief that corruption is a necessary evil in the current environment. In contrast, students give more simplistic moral reasons. We conclude by emphasizing that results obtained from different subject pools can complement each other in illuminating different aspects of the same problem.

In this paper we use experimental data from rural Cameroon to quantify the effect of social distance on trust and altruism. Our measure of social distance is relevant to everyday economic interactions: subjects in a Trust Game play with fellow villagers or with someone from a different village. We find that significantly more money is sent when the players are from the same village. Other factors that influence transfers at least as much as the same-village effect are gender, education and membership of rotating credit groups. To test whether Senders are motivated by altruism, they also play a Triple Dictator Game. Senders transfer significantly more money on average in the Trust Game than in the Triple Dictator Game. However, there is also a social distance effect in the Triple Dictator Game. Results from a Risk Game suggest that Trust Game transfers are uncorrelated with attitudes to risk.

Some experimental participants are averse to compound lotteries: they prefer simple lotteries that depend on only one random event, even when the simple lotteries offer lower expected value. This paper proposes that many behavioral “investments” represent more compound risk for poorer people—who often face multiple dimensions of deprivation—than for richer people. As a result, identical aversion to compound lotteries can prevent investment among poorer people, but have no effect on richer people. The paper reports five studies: two initial studies that document that aversion to compound lotteries operates as an economic preference, two “laboratory experiments in the field” in El Salvador, and one Internet survey experiment in India. Poorer Salvadoran women who choose a compound lottery are 27 percentage points more likely to have found formal employment than those who chose a simple lottery, but lottery choice is unrelated to employment for richer women. Poorer students at the national Salvadoran university choose more compound lotteries than richer students, on average, implying that aversion to compound lotteries screened out poorer aspirants but not richer ones. Poorer and lower-caste Indian participants who choose compound lotteries are more likely than those who choose simple lotteries to have a different occupation than their parents, which is not the case for better-off participants. These findings suggest that the consequences of aversion to compound lotteries are different in the context of poverty and disadvantage.

We design a lab-in-the-field experiment involving naturally occurring groups operating in three South-African townships. We introduce an incentives-based mechanism named “participatory incentives” consisting of monetary incentives that are awarded conditional on the group reaching a threshold of minimum level of joint contribution to a common project or good. We show that participatory incentives significantly raise average contribution levels (from 29 to 62% of the endowment) and are even more effective in the presence of highly deprived people. We complement the reduced form estimations of the experimental data with a structural model that sheds light on the role of subjects’ beliefs and responsiveness to a social norm of high cooperation.

We conduct a laboratory experiment in Kenya in which we elicit time and risk preference parameters from 494 participants, using convex time budgets and tightly controlling for transaction costs. Using the Kenyan mobile money system M-Pesa to make real-time transfers to subjects’ phones , we vary whether same-day payments are made immediately after the experimental session or at the close of the business day. We find strong evidence of present bias, with estimates of the present bias parameter ranging from 0.902 to 0.924—but only when same-day payments are made immediately after the experiment.

In this paper, we propose a network model to explain the implications of the pressure to share resources. Individuals use the network to establish social interactions that allow them to increase their income. They also use the network as a safety and to ask for assistance in case of need. The network is therefore a system characterized by social pressure to share and redistribute surplus of resources among members. The main result is that the potential redistributive pressure from other network members causes individuals to behave inefficiently. The number of social interactions used to employ workers displays a non-monotonic pattern with respect to the number of neighbors (degree): it increases for intermediate degree and decreases for high degree. Respect to a benchmark case without social pressure, individuals with few (many) network members interact more (less). Finally, we show that these predictions are consistent with the results obtained in a set of field experiments run in rural Tanzania.

Identifying the impact of remittances on household members remaining behind is difficult due to selection into migration. In this paper, we exploit an unexpected embargo on Qatar, the second major destination among Nepali migrants. Using longitudinal data on about 1,500 Nepali households with migrants prior to the embargo, we assess how this shock translates into changes in remittances and development outcomes. We find a 56% reduction in remittances for households with a migrant in Qatar. At least in the months immediately after the shock, such a fall in remittances does not seem to translate into recipient household's welfare. However, we cannot exclude that such effect might materialize in the medium run. That is particularly true for poor and credit-constrained households, especially vulnerable to the remittance windfall and lacking the ability to move their migrants or other household members to other destinations.

This paper examines child labor response to parental education. Prior studies present anecdotal evidence with a causal interpretation of this relationship rarely explored. Hence, conditional on a range of parental characteristics and multigenerational co-residence, I use as a set of instruments grandparents’ educational attainment to exploit plausibly exogenous variation in parents’ schooling. I generally find evidence of a negative parental education impact on child labor outcomes. The effect of maternal education on household farm work, however, is not significant. With respect to potential mechanisms, the results suggest that engagement in nonfarm employment pursuits among educated parents may mediate these effects.

Strengthening climate resilience requires farmers to select climate adaptation strategies like weather index insurance. Acknowledging that decision-making is not isolated, this study explores simultaneous peer imitation in climate adaptation choices consisting of index insurance, savings, and their interaction. We present results from a lab-in-the-field experiment that introduces innovative index insurance. Findings indicate significant and strong imitation attitudes. While the bigger peer surrounding seems relevant in the static perspective, the closer surrounding gains importance in the dynamic perspective. Additionally, credit, trust, and practical understanding stimulate adoption. Community-based extension interventions and credit-bundled products may increase index insurance diffusion and improve climate resilience.

This study is a reconsideration of a theme, connecting The Theory of Moral Sentiments and The Wealth of Nations, namely the interplay between moral sentiments and self-interest. Two aspects of the theme are examined. The first consists of an interpretation of the so-called ‘das Adam Smith Problem’, an issue originally pointed out by nineteenth-century German scholars. The second, building on the insight of Smith on the association of shame and poverty, reports on recent research that seeks to examine how emotions impact the perception of economic interests and behaviour in marginalized groups.

This paper empirically investigates the economic effects of environmental activities. To be specific, it investigates the interactive influence of firms' environmental management and environmental innovation on their productivity. We consider both internal and external environmental management practices of global firms observed from 41 countries between 2017 and 2019. We also consider both inputs and outputs of firms' innovation activities that aim to reduce environmental impacts. Multiple indices are constructed to comprehensively evaluate firms' environmental activities, and productivity is estimated with a semi-parametric method. We find that environmental management and environmental innovation are directly correlated to each other and both substantially promote productivity; however, they tend to substitute each other's positive effects on productivity. Other variables such as globalization, government, labor inputs, and informal competition strongly affect firm productivity too.

The paper examines the legacy of pre-colonial centralization on tax compliance norms of citizens in contemporary Uganda. Using a regression discontinuity analysis on neighboring ethnic homelands with different levels of pre-colonial centralization, we find that pre-colonial centralization is correlated with stronger norm for tax compliance. The result is explained by the legacy of location-specific capacity of centralized states in upholding authority and a strong social cohesion exhibited through higher interpersonal trust but not through trust in public institutions.

In 2017 the Scottish Government passed the Child Poverty (Scotland) Act with the commitment to significantly reduce the relative child poverty rate from the current prevailing level of around 25% to 10% by 2030/31. In response, the government introduced the Scottish Child Payment (SCP) that provides a direct transfer to households at a fixed rate per eligible child – currently £25 per week. In this paper we explore, using a micro to macro modelling approach, the effectiveness of using the SCP to achieve the Scottish child poverty targets. While we find that the ambitious child poverty targets can technically be met solely using the SCP, the necessary payment of £165 per week amounting to a total government cost of £3 billion per year, makes the political and economy-wide barriers significant. A key issue with only using the SCP is the non-linearity in the response to the payment; as the payment increases, the marginal gain in the reduction of child poverty decreases – this is particularly evident after payments of £80 per week. A ‘policy-mix’ option combining the SCP, targeted cash transfers and other policy levels (such as childcare provision) seems the most promising approach to reaching the child poverty targets.

This paper introduces the concept of institutional resilience based on a population game. Agents in an economy are randomly matched to play a coordination game with two strategies, cooperate and defect. A breach of contract can be adjudicated in court. Agents can update their strategy, which is modelled using the replicator dynamic. In this context, cooperation is defined as the informal institution, whereas the legal system (contract law) constitutes the formal institution. Institutional resilience is defined by how the formal institution of a functioning legal system complements the informal institution of cooperation in a dynamic way. In the wake of an adverse exogenous shock, the formal institution can prevent a total breakdown of cooperation in the population.

This analysis introduces a conceptual framework for economic enfranchisement and studies its effect on an individual’s likelihood to set strong financial goals. A conceptual and empirical model is developed to investigate how economic enfranchisement influences an individual’s likelihood to set a goal and the strength of that goal. The empirical analysis employs an ordered probit to account for the two-stage goal-setting and goal strength decision process. Results show that economic enfranchisement has a significant effect on an individual’s likelihood to set financial goals where more enfranchised individuals are more likely to set strong goals than their disenfranchised counterparts.

Insights on the indirect effects of the COVID-19 pandemic are critical for designing and implementing policies to alleviate the food security burden it may have caused, and for bolstering rural communities against similar macroeconomic shocks in the future. Yet estimating the causal effects of the pandemic is difficult due to its ubiquitous nature and entanglement with other shocks. In this descriptive study, we combine high-resolution satellite imagery to control for plot-level rainfall with household socio-economic panel data from 2014, 2016, 2019 and 2020, to differentiate the effect of the pandemic from climatic shocks on food security in Morogoro, Tanzania. We find evidence of decreased incomes, increased prices of staple foods, and increased food insecurity in 2020 relative to previous years, and link these changes to the pandemic by asking households about their perceptions of COVID-19. Respondents overwhelmingly attribute economic hardships to the pandemic, with perceived impacts differing by asset level.

Climate change is increasing the frequency of extreme weather events, such as drought and heat waves. In this paper, we assess the impact of drought and high temperatures on the employment outcomes of working-age individuals in South Africa between 2008 and 2017. We merge high-resolution weather data with detailed individual-level survey data on labor market outcomes, and estimate causal impacts using a fixed effects framework. We find that increases in the occurrence of drought reduce overall employment. These effects are concentrated in the tertiary sector, amongst informal workers, and in provinces with a higher reliance on tourism. Taken together, our results suggest that the impacts of climate change will be felt unequally by South Africa's workers.

Cleaner cooking is an important policy objective in the bid to achieve sustainable development. Despite efforts to encourage cleaner cooking fuel use, biomass fuel is still widely used in many developing countries. This study investigates the role of behavioral factors, particularly risk aversion, in the choice of cooking fuels in Ghana. In addition, we investigate how the improvement of supply infrastructure and services mitigates the impact of risk preferences in fuel choices. By employing data from the recent round of the Ghana Living Standards Survey, we find that risk-averse households are less likely to choose liquified petroleum gas as their cooking fuel. However, the effect is mitigated for households located in districts with more supply infrastructure. Additional analyses reveal the influence of risk and time preferences in other household behavior.

The vulnerability of small firms to price shocks may partly explain why fossil fuel subsidy removals in developing countries are so difficult to implement. This paper analyzes the effects of fuel and electricity price increases on profits of micro- and small-sized enterprises in Mexico. Using representative cross-sectional data, simulations of profit losses hint at potentially large short-term effects. First-order profit losses of a 1 per cent price increase are 0.2 per cent for fuels and 0.07 per cent for electricity, but are higher than 1 per cent for fuels in the transport sector. These effects are larger for formal than for informal firms, with energy-using low-profit firms being most vulnerable. Second-order impacts – predicted using estimated input-demand elasticities – indicate that firms react to price shocks by substituting labor for energy, while the self-employed appear to increase their own labor input. Reduced-form regressions show that some firms pass on higher fuel costs to customers.

How stable are democracies? Building on Ghosal and Proto (2009, Journal of Public Economics, 93, 1078–1089), the conditions under which democracies are stable are analyzed. How these conditions relate to the threat of the rise of right wing populism poses to democracies is discussed.