Working Paper 2011-197
We test with a randomized experiment in the slums of Nairobi whether violence suffered during the 2007 political outbreaks affects trustworthiness learning when participants live group experiences and face opportunism and free riding in public good games (PGGs) between two subsequent trust games (TGs). Our findings document that participants move toward balanced reciprocity after the PGG with the exception of those who have experienced directly or indirectly physical violence and/or forced relocation who exhibit significantly less trustworthiness in the second TG round. Results are robust to several robustness checks controlling for selection into victimization. Since in a framework of asymmetric information and incomplete contracts, trust games mimic sequential economic exchanges whose functioning is crucial to economic growth, we argue that our results identify a microeconomic nexus among socio-political instability, violence and growth helping to solve identification problems of the cross-country literature on the subject.
Authors: Leonardo Becchetti , Pierluigi Conzo, Alessandro Romeo.