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Using Experimental Economics to Measure Social Capital And Predict Financial Decisions

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Author Info
Dean S. Karlan () (Economic Growth Center, Yale University and Princeton University)

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Abstract

Questions remain as to whether results from experimental economics games are generalizable to real decisions in non-laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust.

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Publisher Info
Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 909.

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Length: 20 pages
Date of creation: Apr 2005
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Handle: RePEc:egc:wpaper:909

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Related research
Keywords: trust game; experimental economics; microfinance;

Other versions of this item:

Find related papers by JEL classification:
B4 - Schools of Economic Thought and Methodology - - Economic Methodology
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
O1 - Economic Development, Technological Change, and Growth - - Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-95, December. [Downloadable!] (restricted)
  2. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination In A Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 351-377, February. [Downloadable!] (restricted)
    Other versions:
  3. Carol C. Bertaut & Michael Haliassos, 2001. "Debt Revolvers for Self Control," University of Cyprus Working Papers in Economics 0208, University of Cyprus Department of Economics. [Downloadable!]
  4. Joseph Henrich et al., 2001. "In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies," American Economic Review, American Economic Association, vol. 91(2), pages 73-78, May. [Downloadable!] (restricted)
    Other versions:
  5. Joseph Henrich & Robert Boyd & Samuel Bowles & Colin Camerer & Herbert Gintis & Richard McElreath & Ernst Fehr, 2001. "In Search of Homo Economicus: Experiments in 15 Small-Scale Societies," Artefactual Field Experiments 0059, The Field Experiments Website. [Downloadable!]
  6. Dean S. Karlan & Jonathan Zinman, 2005. "Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment," Working Papers 911, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  7. Dean S. Karlan, 2005. "Social Connections and Group Banking," Working Papers 913, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  8. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, vol. 83(4), pages 792-810, September. [Downloadable!] (restricted)
    Other versions:
  9. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  10. Nava Ashaf & Dean Karlan & Wesley Yin, 2004. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," Natural Field Experiments 0007, The Field Experiments Website. [Downloadable!]
  11. David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," Documentos de Trabajo 80, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
    • David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," NBER Working Papers 7879, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 635-672, May. [Downloadable!] (restricted)
    Other versions:
  13. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 811-846, August. [Downloadable!] (restricted)
  14. Abigail Barr, 2003. "Trust and expected trustworthiness: experimental evidence from zimbabwean villages," Economic Journal, Royal Economic Society, vol. 113(489), pages 614-630, 07. [Downloadable!] (restricted)
  15. Joseph Henrich & Robert Boyd & Samuel Bowles & Colin Camerer & Ernst Fehr & Herbert Gintis & Richard McElreath, 2001. "Cooperation, Reciprocity and Punishment in Fifteen Small-scale Societies," Working Papers 01-01-007, Santa Fe Institute.
  16. Fisman, Raymond & Khanna, Tarun, 1999. "Is trust a historical residue? Information flows and trust levels," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 79-92, January. [Downloadable!] (restricted)
  17. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July. [Downloadable!] (restricted)
  18. Lorenz Götte & Ernst Fehr, 2002. "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment," Natural Field Experiments 0047, The Field Experiments Website. [Downloadable!]
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  19. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November. [Downloadable!] (restricted)
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