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Convertible local currency and trust: ‘It’s Not You, It’s Me’ – A field experiment in the French Basque Country

Author

Listed:
  • Hayyan Alia
  • Eli Spiegelman

Abstract

We present a field experiment investigating the mechanism by which community currencies enhance trust. Our question is the following: do I trust more when using a community currency because I am a trusting-type person or because I think that you are trustworthy? We call the former preference-based trust; while the latter is belief-based trust . We apply a modification of the standard trust game from the experimental economics literature to disentangle these mechanisms. Player A has to choose whether or not to trust player B , and player B can either reciprocate that trust or not. Our innovation is in experimentally separating the currency in which the game is played ( effective currency ), from the currency preferred by the participant ( preferred currency ). If the mechanism is preference-based, then preferred currency will determine trust more than effective; if it is belief-based, then the effective currency will be determinant. We find strong evidence of the preference-based mechanism of community currencies on trust, and only weak evidence of the belief-based mechanism.

Suggested Citation

  • Hayyan Alia & Eli Spiegelman, 2020. "Convertible local currency and trust: ‘It’s Not You, It’s Me’ – A field experiment in the French Basque Country," Local Economy, London South Bank University, vol. 35(2), pages 105-120, March.
    • Handle: RePEc:sae:loceco:v:35:y:2020:i:2:p:105-120
    DOI: 10.1177/0269094220905505
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    References listed on IDEAS

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