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Traditional trust measurement and the risk confound: An experiment in rural Paraguay

  • Schechter, Laura

Play in the traditional trust experiment depends both on trust beliefs and on levels of risk aversion. We ran two experiments with a diverse set of subjects in fifteen villages of rural Paraguay, the traditional trust experiment and a new experiment measuring only risk aversion. We find that risk attitudes are highly predictive of play in the trust game. In addition, omitting risk aversion as a regressor in trust regressions signficiantly changes the coefficients of important explanatory variables such as gender and wealth. We also use data on income and bet choice to calculate players' coefficients of relative risk aversion.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 62 (2007)
Issue (Month): 2 (February)
Pages: 272-292

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Handle: RePEc:eee:jeborg:v:62:y:2007:i:2:p:272-292
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital And Predict Financial Decisions," Working Papers 909, Economic Growth Center, Yale University.
  2. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," Working Papers 182, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  3. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
  4. Carter, Michael R. & Castillo, Marco, 2003. "An Experimental Approach to Social Capital in South Africa," Staff Paper Series 448, University of Wisconsin, Agricultural and Applied Economics.
  5. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
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  9. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
  10. James Andreoni & Marco Castillo & Ragan Petrie, 2003. "What Do Bargainers' Preferences Look Like? Experiments with a Convex Ultimatum Game," American Economic Review, American Economic Association, vol. 93(3), pages 672-685, June.
  11. Burks, Stephen V. & Carpenter, Jeffrey P. & Verhoogen, Eric, 2003. "Playing both roles in the trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 195-216, June.
  12. Narayan, Deepa & Pritchett, Lant, 1997. "Cents and sociability : household income and social capital in rural Tanzania," Policy Research Working Paper Series 1796, The World Bank.
  13. Ananish Chaudhuri & Lata Gangadharn, 2003. "Gender Differences in Trust and Reciprocity," Department of Economics - Working Papers Series 875, The University of Melbourne.
  14. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstr�m, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
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