Monday, July 25, 2011

Playing the Trust Game in Rural Cameroon

Hi Everyone,

I recently read "Does trust extend beyond the village? Experimental trust and social distance in Cameroon" in Experimental Economics and had some reservations about their use of the term "social distance" to describe their primary findings. My thoughts on this are in detail below.

I think the paper is interesting and well done. The authors use the trust game to look at how people respond to partners from their own or a neighboring (but not very close) village. Their main result is that the first movers send significantly more money to their anonymous partner when that partner is in the same village than when the partner is in a different village. It is a between comparison. This is not entirely surprising, but still a nice result and the experiment and analyses are well done.

But I was surprised to find no discussion or even mention of how the role that norms of money lending and informal insurance may influence behavior in the laboratory. There are large bodies of literature on informal lending and insurance that suggest how much influence such institutions have in how people perceive and use money in rural villages where formal credit and insurance markets are incomplete. The trust game in many ways may simply cues participants, who in turn respond as their village norms dictate. In that case, the authors' results on trust differing according to village membership would be confounded by this norm response. In fact, the norms of behavior outside the lab setting, which I argue are invoked in the game, may even be capturing more than just trust (with expected reciprocity), but within village norms of giving, sharing and insurance. This is particularly true if players are aware of each others' village locale. Thus the paper's measure is not a response to social distance but a measure of norms. That the design includes people from both villages paired with others from the opposing village helps, but only nullifies my comment if the villages are incredibly different with very different norms of money usage.

In that sense, I do not think that the experimental design (and accompanying survey data) allow the authors to unequivocally identify the difference in giving by village membership as being a social distance effect. Thus, the interpretation that social distance explains the difference in trusting may not in fact explain what people are responding to in your treatment. Rather, they may be responding according the the norms in their villages (i.e. how people respond to the money allocation events).

As the results show, whether or not the recipient is in the village certainly matters in terms of average amount given in the trust game, but WHY it matters may not be (primarily) social distance interacting with individual decision making. With informal insurance and credit markets playing such an important role in how rural communities in many developing countries use money, I would expect certain rules or norms to be in place for how people respond to the in village/out village money allocation events. One example of a rule or norm would be "when someone in our village asks for money, we always give". I realize that this is not the appropriate rule/norm for their data, since they have such high rates of giving overall and thus cannot look at the play/do not play decision. But I think it conveys the idea that people may not be responding to the incentives and the expectation of immediate reciprocity (i.e. choosing to trust), but rather responding to the cue of it being a money allocation event -- norms of how people respond to such an event likely differ according to whether the other guy is from one's village. To their credit the authors do include ROSCA membership in their regressions. This begins to get at this issue, as they allude to but discuss only briefly. And the coefficient on RSOCA membership is large (larger than their coefficient on the variable of interest) and highly significant. That ROSCA membership is so important (but length of time in a ROSCA is not) suggests there is something more going on here and that village differences is capturing more than just social distance.

I posed the following questions to the authors:
- Have you tried including in the regression an interaction term of ROSCA membership and A and B in the same village?
- Another comment in terms of your future research, why trust game transfers so high among women?
- What about being a women in these villages in Cameroon would contribute to this behavior?
- In line with my above statement on village norms-could it be that women face a greater expectation of giving/sharing and insurance within a village? So that again, it's not trust per say that you're capturing through gender, but the intensity with which female villagers are subject to these financial and familial obligations?

1 comment:

  1. My question with social norms is many of the mechanisms that experementistas test for: social distance, trust, competitiveness, etc. are shaped by social norms. Namely, in an anecdotal/litarary sense, I see the former as a subset of the latter.

    So rather than saying trust vs. social norms (where they are mutually exclusive sets), I think trust vs. reciprocity, which we can think of as state variables, and social norms as a functional form (i.e. norms shape levels of trust and levels of reciprocity, which feed back into norms....).

    This came up in an interview of mine-where they guy asked me how I'd test for risk aversion, and then how was that different from social norms.

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