Cross-Racial Envy and Underinvestment in South African Partnerships

Posted: 10 Sep 2008

See all articles by Daniel Haile

Daniel Haile

Tilburg University

Abdolkarim Sadrieh

University of Magdeburg

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 2008

Abstract

Trust games are employed to investigate the effect of heterogeneity in income and race on cooperation in South Africa. The amount of socio-economic information available to the subjects about their counterparts is varied. No significant behavioural differences are observed when no such information is provided. However, when the information is available, it significantly affects individual trust behaviour. The low income subjects from both racial groups invest significantly less in partnerships with the high income subjects of the other racial group than in any other partnership. We attribute this behaviour to cross-racial envy, which on aggregate may lead to substantial efficiency losses.

Keywords: Trust game, Ethnic diversity, Income inequality, Cooperation

JEL Classification: C91, J15

Suggested Citation

Haile, Daniel and Sadrieh, Abdolkarim and Verbon, Harrie A. A., Cross-Racial Envy and Underinvestment in South African Partnerships (September 2008). Cambridge Journal of Economics, Vol. 32, No. 5, pp. 703-724, 2008, Available at SSRN: https://ssrn.com/abstract=1265475 or http://dx.doi.org/10.1093/cje/ben011

Daniel Haile (Contact Author)

Tilburg University ( email )

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Abdolkarim Sadrieh

University of Magdeburg ( email )

Faculty of Economics and Management
Postbox 4120
39016 Magdeburg
Germany

HOME PAGE: http://www.ww.uni-magdeburg.de

Harrie A. A. Verbon

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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