IDEAS home Printed from https://ideas.repec.org/p/mlb/wpaper/1067.html
   My bibliography  Save this paper

Relative Earnings and Giving in a Real-Effort Experiment

Author

Listed:
  • Nisvan Erkal
  • Lata Gangadharan
  • Nikos Nikiforakis

Abstract

This paper investigates the relationship between relative earnings and giving in a twostage, real-effort experiment. In the first stage, four players compete in a tournament that determines their earnings. In the second stage, they decide whether they wish to transfer part of their earnings to one or more of their group members. Our main finding is that those who are ranked first are significantly less likely to give than those who are ranked second. This non-monotonic relationship between earnings and likelihood of giving disappears if individual earnings are randomly determined or if individuals learn about the second (transfer) stage only after they earn their income. These results suggest that the non-monotonic relationship detected may be driven by differences in individuals’ expectations about others’ behavior in the second stage, which are correlated with their own willingness to give.

Suggested Citation

  • Nisvan Erkal & Lata Gangadharan & Nikos Nikiforakis, 2009. "Relative Earnings and Giving in a Real-Effort Experiment," Department of Economics - Working Papers Series 1067, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1067
    as

    Download full text from publisher

    File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0014/801131/1067.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hoffman Elizabeth & McCabe Kevin & Shachat Keith & Smith Vernon, 1994. "Preferences, Property Rights, and Anonymity in Bargaining Games," Games and Economic Behavior, Elsevier, vol. 7(3), pages 346-380, November.
    2. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    3. Carpenter Jeffrey P & Seki Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-25, December.
    4. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
    5. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    6. Rafael Rob & Peter Zemsky, 2002. "Social Capital, Corporate Culture, and Incentive Intensity," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 243-257, Summer.
    7. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    8. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    9. Todd L. Cherry & Peter Frykblom & Jason F. Shogren, 2002. "Hardnose the Dictator," American Economic Review, American Economic Association, vol. 92(4), pages 1218-1221, September.
    10. Ruffle, Bradley J., 1998. "More Is Better, But Fair Is Fair: Tipping in Dictator and Ultimatum Games," Games and Economic Behavior, Elsevier, vol. 23(2), pages 247-265, May.
    11. Allen McDowell, 2003. "From the help desk: hurdle models," Stata Journal, StataCorp LP, vol. 3(2), pages 178-184, June.
    12. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-1136, December.
    13. James Andreoni & Lise Vesterlund, 2001. "Which is the Fair Sex? Gender Differences in Altruism," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 293-312.
    14. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    15. Eckel, Catherine C. & Grossman, Philip J., 2008. "Differences in the Economic Decisions of Men and Women: Experimental Evidence," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 57, pages 509-519, Elsevier.
    16. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-857, July.
    17. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
    18. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-321, May.
    19. Catherine Eckel & Philip J. Grossman & Angela Milano, 2007. "Is More Information Always Better? An Experimental Study of Charitable Giving and Hurrican Katrina," Southern Economic Journal, John Wiley & Sons, vol. 74(2), pages 388-411, October.
    20. James Andreoni & Marco Castillo & Ragan Petrie, 2009. "Revealing Preferences for Fairness in Ultimatum Bargaining," Korean Economic Review, Korean Economic Association, vol. 25, pages 35-63.
    21. Drago, Robert & Garvey, Gerald T, 1998. "Incentives for Helping on the Job: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 1-25, January.
    22. Muriel Niederle & Lise Vesterlund, 2007. "Do Women Shy Away From Competition? Do Men Compete Too Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1067-1101.
    23. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    24. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    25. David C. Ribar & Mark O. Wilhelm, 2002. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 425-457, April.
    26. Fehr, Ernst & Schmidt, Klaus M., 2006. "The Economics of Fairness, Reciprocity and Altruism - Experimental Evidence and New Theories," Handbook on the Economics of Giving, Reciprocity and Altruism, in: S. Kolm & Jean Mercier Ythier (ed.), Handbook of the Economics of Giving, Altruism and Reciprocity, edition 1, volume 1, chapter 8, pages 615-691, Elsevier.
    27. Robert Mcclelland & Arthur C. Brooks, 2004. "What is the Real Relationship between Income and Charitable Giving?," Public Finance Review, , vol. 32(5), pages 483-497, September.
    28. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    29. Jeffrey Carpenter & Allison Liati & Brian Vickery, 2006. "They Come to Play: Supply Effects in an Economic Experiment," Middlebury College Working Paper Series 0602, Middlebury College, Department of Economics.
    30. Matt Parrett, 2006. "An Analysis of the Determinants of Tipping Behavior: A Laboratory Experiment and Evidence from Restaurant Tipping," Southern Economic Journal, John Wiley & Sons, vol. 73(2), pages 489-514, October.
    31. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    32. Christina M. Fong, 2007. "Evidence from an Experiment on Charity to Welfare Recipients: Reciprocity, Altruism and the Empathic Responsiveness Hypothesis," Economic Journal, Royal Economic Society, vol. 117(522), pages 1008-1024, July.
    33. Edward P. Lazear, 1991. "Labor Economics and the Psychology of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 89-110, Spring.
    34. Duffy, John & Kornienko, Tatiana, 2010. "Does competition affect giving?," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 82-103, May.
    35. Nisvan Erkal & Lata Gangadharan & Nikos Nikiforakis, 2011. "Relative Earnings and Giving in a Real-Effort Experiment," American Economic Review, American Economic Association, vol. 101(7), pages 3330-3348, December.
    36. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
    37. Buckley, Edward & Croson, Rachel, 2006. "Income and wealth heterogeneity in the voluntary provision of linear public goods," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 935-955, May.
    38. Hochman, Harold M & Rodgers, James D, 1969. "Pareto Optimal Redistribution," American Economic Review, American Economic Association, vol. 59(4), pages 542-557, Part I Se.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pedro Rey-Biel & Roman Sheremeta & Neslihan Uler, 2018. "When Income Depends on Performance and Luck: The Effects of Culture and Information on Giving," Research in Experimental Economics, in: Anna Gunnthorsdottir & Douglas A. Norton (ed.), Experimental Economics and Culture, volume 20, pages 167-203, Emerald Publishing Ltd.
    2. Tonin, Mirco & Vlassopoulos, Michael, 2017. "Sharing one’s fortune? An experimental study on earned income and giving," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 66(C), pages 112-118.
    3. Gangadharan, Lata & Grossman, Philip J. & Vecci, Joe, 2021. "Moving on up: The impact of income mobility on antisocial behaviour," European Economic Review, Elsevier, vol. 134(C).
    4. Grundmann, Susanna, 2020. "Do just deserts and competition shape patterns of cheating?," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-79-20, University of Passau, Faculty of Business and Economics.
    5. Pamela Jakiela, 2013. "Equity vs. efficiency vs. self-interest: on the use of dictator games to measure distributional preferences," Experimental Economics, Springer;Economic Science Association, vol. 16(2), pages 208-221, June.
    6. Roman M. Sheremeta & Neslihan Uler, 2016. "The Impact of Taxes and Wasteful Government Spending on Giving," Working Papers 16-07, Chapman University, Economic Science Institute.
    7. Kerschbamer, Rudolf, 2015. "The geometry of distributional preferences and a non-parametric identification approach: The Equality Equivalence Test," European Economic Review, Elsevier, vol. 76(C), pages 85-103.
    8. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    9. Gerald Eisenkopf, 2018. "Unequal Incentives and Perceived Fairness in Groups," Games, MDPI, Open Access Journal, vol. 9(3), pages 1-18, September.
    10. Breitmoser, Yves & Vorjohann, Pauline, 2018. "Welfare-Based Altruism," Rationality and Competition Discussion Paper Series 89, CRC TRR 190 Rationality and Competition.
    11. Roman M. Sheremeta & Neslihan Uler, 2021. "The impact of taxes and wasteful government spending on giving," Experimental Economics, Springer;Economic Science Association, vol. 24(2), pages 355-386, June.
    12. Danková, Katarína & Servátka, Maroš, 2015. "The house money effect and negative reciprocity," Journal of Economic Psychology, Elsevier, vol. 48(C), pages 60-71.
    13. Neslihan Uler, 2011. "Public goods provision, inequality and taxes," Experimental Economics, Springer;Economic Science Association, vol. 14(3), pages 287-306, September.
    14. Thorsten Chmura & Christoph Engel & Markus Englerth, 2013. "Selfishness As a Potential Cause of Crime. A Prison Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_05, Max Planck Institute for Research on Collective Goods.
    15. Pedro Rey-Biel & Roman M. Sheremeta & Neslihan Uler, 2011. "(Bad) Luck or (Lack of) Effort?: Comparing Social Sharing Norms between US and Europe," Working Papers 11-11, Chapman University, Economic Science Institute.
    16. Eisenkopf, Gerald & Fischbacher, Urs & Föllmi-Heusi, Franziska, 2013. "Unequal opportunities and distributive justice," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 51-61.
    17. Gerald Eisenkopf, 2015. "Unequal Incentives and Perceived Fairness in Groups," Working Paper Series of the Department of Economics, University of Konstanz 2015-03, Department of Economics, University of Konstanz.
    18. Riyanto, Yohanes E. & Zhang, Jianlin, 2013. "The impact of social comparison of ability on pro-social behaviour," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 37-46.
    19. Cason, Timothy N. & Gangadharan, Lata & Nikiforakis, Nikos, 2011. "Can real-effort investments inhibit the convergence of experimental markets?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 97-103, January.
    20. Robert Oxoby, 2013. "Paretian dictators: constraining choice in a voluntary contribution game," Constitutional Political Economy, Springer, vol. 24(2), pages 125-138, June.

    More about this item

    Keywords

    Relative income; Altruism; Real effort; Self-selection; Luck;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D3 - Microeconomics - - Distribution
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:1067. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/demelau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dandapani Lokanathan (email available below). General contact details of provider: https://edirc.repec.org/data/demelau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.