My Poor(er) Friend: (Non-)Economic Integration in Public Good Games

We run an experiment where subjects play a standard repeated two player public good game looking at the effect of being matched to a subject with different endowment — and keeping fixed the overall distribution of endowments. Unlike most of the existing literature, all subjects are aware of the existing heterogeneity in endowments, regardless of whether they are assigned to a financially homogeneous or heterogeneous group. Moreover, since in modern societies financial heterogeneity typically correlates with many other forms of heterogeneity, including habits, tastes and membership in given social groups, we look at how financial heterogeneity interacts with in–group vs. out–group feeling, using randomly formed groups. While neither economic integration nor group membership alone significantly affects overall contributions, and hence welfare, the two strongly interact: being matched to a partner with a different endowment and from the other group results in particularly low contributions. Similarly, being matched to a partner who is from the other group and has low endowment results in particularly low contributions.