Hitting Rock Bottom: Economic Hardship and Cheating

This paper investigates whether economic hardship undermines preferences for honesty. We use controlled, high-stake measures of cheating for private benefit in a sample of 5,664 Kenyans, exploiting three complementary sources of variation: experimentally manipulated monetary incentives to cheat, a randomized increase in the salience of own financial situation, and the Covid-19 income shock (exploiting randomized survey timing, either before or during the crisis). Cheating behavior is highly responsive to financial incentives in the experiment. Covid-19 economic hardship—marked by a 51% drop in earnings—leads to a sharp increase in the prevalence of cheating, and the effect increases gradually with prolonged hardship. The effects are largest among the most economically impacted and are amplified when the salience of own financial situation is experimentally increased. The results demonstrate that while most individuals exhibit a strong preference against cheating under normal conditions (in line with the existing body of work), economic forces can account for a substantial share of variation in dishonesty: the estimated cheating rate rises from 29% under low stakes in normal times to 86% under high stakes during the crisis.