Project

Experiments in Macroeconomics, Ethics and Anticorruption

Goal: We conduct laboratory and lab-in-the-field experiments (the latter by help of classEx) to investigate methods for guiding behavior to better macroeconomic coordination or more ethical conduct.

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Johann Graf Lambsdorff
added 3 research items
Corruption has been a feature of public institutions for centuries yet only relatively recently has it been made the subject of sustained scientific analysis. Lambsdorff shows how insights from institutional economics can be used to develop a better understanding of why corruption occurs and the best policies to combat it. He argues that rather than being deterred by penalties, corrupt actors are more influenced by other factors such as the opportunism of their criminal counterparts and the danger of acquiring an unreliable reputation. This suggests a novel strategy for fighting corruption similar to the invisible hand that governs competitive markets. This strategy - the ‘invisible foot’ - shows that the unreliability of corrupt counterparts induces honesty and good governance even in the absence of good intentions. Combining theoretical research with state-of-the-art empirical investigations, this book will be an invaluable resource for researchers and policy-makers concerned with anti-corruption reform.
Previous laboratory studies on the centipede game have found that subjects exhibit surprisingly high levels of cooperation. Across disciplines, it has recently been highlighted that these high levels of cooperation might be explained by “team reasoning”, the willingness to think as a team rather than as an individual. We run an experiment with a standard centipede game as a baseline. In two treatments, we seek to induce team reasoning by making a joint goal salient. First, we implement a probabilistic variant of the centipede game that makes it easy to identify a joint goal. Second, we frame the game as a situation where a team of two soccer players attempts to score a goal. This frame increases the salience even more. Compared to the baseline, our treatments induce higher levels of cooperation. In a second experiment, we obtain similar evidence in a more natural environment–a beer garden during the 2014 FIFA Soccer World Cup. Our study contributes to understanding how a salient goal can support cooperation.
Johann Graf Lambsdorff
added a research item
The consequences of violent conflict remain puzzling, with some studies suggesting discrimination, others discovering increased prosociality, and others finding evidence for reduced prosociality. We solve this puzzle with results from dictator, ultimatum, and trust games run with Muslim and Christian students in post-conflict Ambon, Indonesia. We find that discrimination is only moderate and that the reaction of prosociality is context-specific. Prosociality is low if we reveal the counterpart’s religious or ethnic identity and is high if it is not revealed. Our effects are particularly strong if subjects had been victimised during the conflict. We argue that revealing the identity inhibits the lessons learned from the conflict and brings about emotional numbing because revealed identities remind subjects of the conflict. Such religious and ethnic cues can thus make conflict salient. We infer that avoiding such cues is important for peace reconciliation as well as economic and social development.
Johann Graf Lambsdorff
added a research item
Contribution to the journal's blog "Corruption: A Bully Pulpit Symposium" to be found at https://www.publicadministrationreview.com/2018/10/23/658/
Johann Graf Lambsdorff
added a research item
Anecdotal evidence suggests that tax morale diminishes with income and with levels of taxation. We designed an experiment that enables identification of causal effects. Subjects carry out a sequence of real effort tasks. The income earned varies with individual differences in effort (combined with variances related to skill or luck) and with the exogenously given length of the tasks. For each task, subjects privately roll a die, whose value determines the tax rate, which is then reported by subjects. This provides subjects with an incentive to cheat. Tax morale diminishes with higher effort, which might find ethical justification, but also with longer tasks, which would not. We implement treatments that vary the range of taxation. Contrary to widespread belief, participants’ tax morale is invariant to these treatments. Our findings are best explained by a psychological force that tempts rich people to cheat more. This force does not seem to be related to fairness ideals that are prominent in theories of distributional justice nor to absolute levels of taxation.
Johann Graf Lambsdorff
added a research item
How is negative reciprocity cultivated in an environment of violent conflict? This study investigates how students in the West Bank react to unfair proposals in an ultimatum game. Proposals submitted with Hebrew as compared to Arab handwriting are rejected more often. Israelis must offer 15 percent more of a given stake than Palestinians in order to achieve the same probability of acceptance. This willingness to lose money by rejecting proposals reveals a preference for discrimination against Israelis, cultivated in the conflict-ridden environment. Students who voice a militant attitude, surprisingly, do not reveal a higher tendency to discriminate, exercising a high degree of negative reciprocity toward all unfair proposals. But those who favor a political role for Islam have a higher inclination to discriminate. This implies that ethnic and religious cleavages do not consistently generate in-group solidarity.
Marcus Giamattei
added a research item
classEx is a novel software that allows lecturers to carry out experiments in the classroom with an instantaneous graphical illustration of findings. Standard experiments with multiple treatments, monetary incentives, roles, groups, rounds and stages are available in a ready-made format. A back end allows more sophisticated users to implement their own experiments. We present examples, describe the architecture and show how the design can be tailored to become useful for research.
Marcus Giamattei
added 4 research items
We conducted an experiment in a highly cooperative environment to find out how a disruption, similar to a broken window, affects behavior. A centipede game was framed as a game of soccer and run with smartphones during a soccer public viewing event, that is, a Bavarian beer garden with a large screen displaying a soccer game. We provided some subjects with information that was supportive to cooperation and others with disruptive information, aimed at inducing a broken window effect. The disruption reduced the willingness to cooperate at the final stage of the game. But expectations regarding teammates remained unaffected such that cooperation at earlier stages remained high. Cooperation is thus not as fragile as one might fear.
We carry out an experiment on a macroeconomic price setting game where prices are complements. Despite relevant information being common knowledge and price flexibility we observe significant deviation from equilibrium prices and history dependence. In a first treatment we observe that equilibrium values were obtained in the long run but at the cost of a very slow adjustment and thus history dependence. By reporting a business indicator in a simpler form, subjects were given the chance to coordinate their prices by help of a heuristic in a second treatment. This option was widely taken, bringing about excess volatility and a deviation from equilibrium even in the long run. In a third treatment with staggered pricing we observe, contrary to theoretical predictions, the one-round ahead (publicly known) shock is significant, but future inflation is not. Our findings cast light on price dynamics when subjects have limited computational capacities. --
How should countries in a fixed exchange rate system balance their current account? This question was at the center of the historical debate between Keynes and White in 1944 and is being debated increasingly these days for the Eurozone. Should consolidation by deficit countries be complemented by higher spending in surplus countries in order to avoid a downward bias in the level of consumption? We investigate the associated disequilibrium behavior experimentally, letting our experimental subjects act as heads of state who repeatedly seek to coordinate their policies. If only deficits are punished, as proposed by White, we observe that consumption is persistently reduced and adjustment is slower than in a treatment in which a surplus is also punished, as suggested by Keynes. We find support for the fact that underconsumption occurs for behavioral but not for rational reasons.
Johann Graf Lambsdorff
added a project goal
We conduct laboratory and lab-in-the-field experiments (the latter by help of classEx) to investigate methods for guiding behavior to better macroeconomic coordination or more ethical conduct.