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Is Trust a Bad Investment?

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  • Ashraf, Nava

    (Harvard U)

  • Bohnet, Iris

    (Harvard U)

  • Piankov, Nikita

    (Harvard U)

Abstract

This paper examines whether trust is an investment decision under uncertainty, based on the expectation of trustworthiness, and whether trustworthiness is reciprocity, conditional on one's counterpart's behavior. In experiments run in Russia, South Africa and the United States, we find that only about one third of the subjects who trust expect to make money and that reciprocity matters in the United States but hardly in Russia and South Africa. On average, trust and trustworthiness behavior is significantly related to warm-glow kindness-with the exception of women's trust, which is almost exclusively accounted for by expectations of return. One-shot trust appears to "pay" for some but not for others. Key Words: Trust, kindness, reciprocity, gender, cross-cultural experiments.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp03-047.

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Date of creation: Nov 2003
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Handle: RePEc:ecl:harjfk:rwp03-047

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Citations

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Cited by:
  1. Urs Fischbacher & Simon Gächter, 2005. "Heterogeneous social preferences and the dynamics of free riding in public goods," IEW - Working Papers 261, Institute for Empirical Research in Economics - University of Zurich.
  2. Catherine Eckel & Rick Wilson, 2006. "Internet cautions: Experimental games with internet partners," Experimental Economics, Springer, vol. 9(1), pages 53-66, April.
  3. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2006. "Preferences, Poverty and Politics: Experimental and Survey Data from Vietnam," Levine's Bibliography 321307000000000054, UCLA Department of Economics.
  4. Alm, James & Torgler, Benno, 2006. "Culture differences and tax morale in the United States and in Europe," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 224-246, April.
  5. Kanagaretnam, Kiridaran & Mestelman, Stuart & Nainar, Khalid & Shehata, Mohamed, 2009. "The impact of social value orientation and risk attitudes on trust and reciprocity," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 368-380, June.
  6. Justine Burns, 2004. "Race and trust in post-apartheid South Africa," SALDRU/CSSR Working Papers 078, Southern Africa Labour and Development Research Unit, University of Cape Town.
  7. Burns, Justine, 2006. "Racial stereotypes, stigma and trust in post-apartheid South Africa," Economic Modelling, Elsevier, vol. 23(5), pages 805-821, September.
  8. Alessandro Innocenti & Maria Grazia Pazienza, 2006. "Altruism and Gender in the Trust Game," Labsi Experimental Economics Laboratory University of Siena 005, University of Siena.
  9. Robert Hoffmann, 2006. "The Cognitive Origins of Social Stratification," Computational Economics, Society for Computational Economics, vol. 28(3), pages 233-249, October.
  10. Bohnet, Iris & Zeckhauser, Richard, 2004. "Trust, risk and betrayal," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 467-484, December.
  11. Tu, Qin & Bulte, Erwin, 2010. "Trust, Market Participation and Economic Outcomes: Evidence from Rural China," World Development, Elsevier, vol. 38(8), pages 1179-1190, August.
  12. Torgler, Benno & Schneider, Friedrich G., 2006. "What Shapes Attitudes Toward Paying Taxes? Evidence from Multicultural European Countries," Berkeley Olin Program in Law & Economics, Working Paper Series qt5q14k3wr, Berkeley Olin Program in Law & Economics.

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