This paper presents the results of an experiment where people can reduce (`burn`) other subjects` money at a cost to their own, with the decisions of one of them (randomly chosen after all decisions are made) getting implemented to determine final winnings. Almost 50% of the subjects engage in money burning, eliminating some 23% of the earnings of the other subjects. The price elasticity of burning is estimated, and found to be less than one up to a lower boundary price of about 0.22. Three subjects out of four appear rank egalitarian, providing support to theories of interdependent preferences that predict that agents care about how money is divided among other agents. Relatively poor and disadvantaged agents burn at least as much as the others. Overall, money burning appears a genuine phenomenon, mirroring the institutional realities of some transition and underdeveloped economies where `the evil eye` can induce behaviour closely resembling money burning, and which may hinder economic growth. Some implications for developed countries are also discussed.
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number
091.