Spite and Development

In a wide variety of settings, spiteful
preferences would constitute an obstacle to cooperation,
trade, and thus economic development. This paper shows that
spiteful preferences - the desire to reduce another's
material payoff for the mere purpose of increasing
one's relative payoff - are surprisingly widespread in
experiments conducted in one of the least developed regions
in India (Uttar Pradesh). In a one-shot trust game, the
authors find that a large majority of subjects punish
cooperative behavior although such punishment clearly
increases inequality and decreases the payoffs of both
subjects. In experiments to study coordination and to
measure social preferences, the findings reveal empirical
patterns suggesting that the willingness to reduce
another's material payoff - either for the sake of
achieving more equality or for the sake of being ahead - is
stronger among individuals belonging to high castes than
among those belonging to low castes. Because extreme social
hierarchies are typically accompanied by a culture that
stresses status-seeking, it is plausible that the observed
social preference patterns are at least partly shaped by
this culture. Thus, an exciting question for future research
is the extent to which different institutions and cultures
produce preferences that are conducive or detrimental to
economic development.