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Relative Earnings and Giving in a Real-Effort Experiment

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  • 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
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    Keywords

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    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

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