Abstract
The existence of a strong link between socio-economic background and individual preferences has been documented among both children and grown-ups. Here, we study whether such a correlation persists even in a highly homogeneous population of young adults: university students. Our findings indicate that participants living in an area characterized by a high socio-economic environment tend to trust more and are more inclined to reciprocate higher levels of trust, as compared to those coming from less wealthy neighborhoods. This behavioral difference is, at least in part, driven by heterogeneities in beliefs: subjects from the most affluent part of the city have more optimistic expectations on their counterpart’s trustworthiness than those living in a lower socio-economic environment. By contrast, no significant differences emerge in other preferences: generosity, risk attitudes, and time preferences. Finally, we do not find any systematic evidence of out-group discrimination based on neighborhood identity.
Highlights
Inequality has been increasing steadily in industrialized societies over the last decades, and this has been recognized as one of the main societal challenges (OECD 2011)
We study the link between trust, trustworthiness, and beliefs to grasp a better understanding of the origins of the observed differences
Controls include the following variables: Age of the participant in years; the dummy Female takes value 1 for females and 0 for males; the dummy Student takes value 1 if the participant is a student; the dummy Moved takes value 1 if a participant was born in an area different from the one he/she was living at the time of the experiment
Summary
Inequality has been increasing steadily in industrialized societies over the last decades, and this has been recognized as one of the main societal challenges (OECD 2011). A small but growing literature has documented that family socio-economic characteristics correlate with children’s risk attitudes, impatience, self-control, and social preferences (Castillo et al 2011; Delaney and Doyle 2012; Bauer et al 2014; Kosse et al 2020) Differences along these dimensions may have important economic consequences, since these traits have been shown to have a long-term effect on a wide variety of life outcomes. As the area of residence is an observable characteristic that might affect behavior and interpersonal interactions in the “real world,” providing this information to subjects may strengthen the external validity of our results Both in the Trust and in the Dictator Game, we provide participants with information on their counterpart’s area of residence, which may be perceived as a signal of socio-economic status.
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