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Risky choices and solidarity: Why experimental design matters.

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Conny Wunsch & Renate Strobl

  • June 1, 2018
  • 1:18 am

SECTOR

Behavioral Research and Academic Engagements

PROJECT TYPE

Lab experiment

DOI

Location

Kenya

BEHAVIORAL THEME

solidarity | risk taking | experimental design
OVERVIEW

Negative income shocks can either be the consequence of risky choices or random events.
A growing literature analyzes the role of responsibility for neediness for informal financial
support of individuals facing negative income shocks based on randomized experiments. In
this paper, we show that studying this question involves a number of challenges that existing
studies either have not been aware of, or have been unable to address satisfactorily. We
show that the average effect of free choice of risk on sharing, i.e. the comparison of mean
sharing across randomized treatments, is not informative about the behavioural effects and
that it is not possible to ensure by the experimental design that the average treatment effect
equals the behavioural effect. Instead, isolating the behavioural effect requires conditioning
on risk exposure. We show that a design that measures subjects preferred level of risk in all
treatments allows isolating this effect without additional assumptions.

THEMATIC AREAS

Another advantage of our design is that it allows disentangling changes in giving behaviour due to attributions
of responsibility for neediness from other explanations. We implement our design in a lab
experiment we conducted with slum dwellers in Nairobi that measures subjects’ transfers
to a worse-off partner both in a setting where participants could either deliberately choose
or were randomly assigned to a safe or a risky project. We find that free choice matters
for giving and that the effects depend on donors’ risk preferences but that attributions of
responsibility play a negligible role in this context.

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