Abstract
We present the results of an experiment where we try to measure the social value of groups. Agents interact with insiders and outsiders in trust games settings and periodically enter markets where they can trade group membership. We found that trust fell when there were groups because of negative discrimination against outsiders. Against this there is evidence that group membership is the source of a psychological benefit, although this may induce social inertia. Overall, the 'pure' effects of groups on welfare are at best neutral and could be negative, pointing to the potential perverse effects of group-based social capital.
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