truth in giving: experimental evidence on the welfare effects of informed giving to the poor
DESCRIPTION
Truth in Giving: Experimental Evidence on the Welfare Effects of Informed Giving to the Poor. A Study by Fong & Oberholzer-Gee, 2011 Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013. Motivation. - PowerPoint PPT PresentationTRANSCRIPT
Truth in Giving: Experimental Evidence on the Welfare Effects of Informed Giving to the PoorA Study by Fong & Oberholzer-Gee, 2011
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013
Motivation• Individuals prefer to support recipients, who are not personal responsible for their
predicament (e.g. people with physical disability)
• Information about the background of needy people can affect how generous a
donation is
Leads to the research question:
„ Are ind iv idua ls w i l l i ng to pay fo r in fo rmat ion tha t a l lows them to ach ieve a p re fe rs
d is t r ibu t ion o f income and what a re the e f fec ts? “
• Therefore decisions in the context of costly endogenous information are examined
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 2
Experimental Design I - Participants of the experiment
• The experiment is set up as a laboratory standard dictator game
• Students from Carnegie Mellon University and University of Pittsburgh were asked to
be part of the experiment as proposer
• Real-life welfare recipients, living in public houses in Pittsburgh, were asked to attend
to the group of responder
• In a prior survey, they were asked about their background and grouped by their
self-assessment
• Here two groups were set up: people with physical disability and people
consuming drugs and alcohol
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 3
Experimental Design II – Different Treatments
Main Treatment: • Dictators know they are randomly paired with a „low-income public housing resident
and that both groups (disability and drugs) are of equal size
• They have the possibility to play a $10 dictator game without further information or
pay $1 to learn about their recipient and allocate the $9 after
Control Treatments:• Subjects have an endowment of $10 and receive the type of the recipient for free
• Subjects have an endowment of $10 and get no further information
• Subjects have an endowment of $9 and receive the type of the recipient for free
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 4
Results I
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 5
Results II
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 6
Results III
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 7
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 8
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 9
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 10
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 11
Results IV
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 12
Conclusion
• A group of donors is willing to pay for information to achive a distribution of income
that comes close to ist preferences
• If information are given, the recipients of the preferd group receive more
• If information are endogenious, all types of recipients are worse off
• The marginal effect of knowing that the recipient is a disable person is positiv,
independelty if information are given or have to be bourght
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 13
Relevance of the Study
• The results of the study have implications for governments and NGOs that try to increase the financial and political support for transfer programs
• Desirable: Donors receive free information indicating their recipient is disable• Information is costly• Recipients are heterogeneous Credible signals of deservedness are needed
• Example: U.S. Social Security program• Entitlement program in which transfers are tied to prior earnings of the recipient
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 14
References
• Fong, Christina, and Felix Oberholzer-Gee (2011). "Truth in Giving: Experimental Evidence on the Welfare Effects of informed Giving to the Poor." Journal of Public Economics 95, 5-6, 436-444.
Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013Seite 15