When Foul Play Seems Fair: Meritocratic (Un)Fairness and
(Dis)Honesty
Fabio Galeotti (University of East Anglia)Reuben Kline (Stony Brook University)
Raimondello Orsini (University of Bologna)
Lorentz Center, NorMAS Workshop 2013
Belief in a Just World and Redistribution
• Belief in a Just World (BJW) is the belief that deserving people are rewarded and undeserving people are punished. Under BJW, salient injustice causes a type of cognitive dissonance which one resolves through rationalization or action.
• BJW (partly) explains cross-national (US vs. West Europe) variation in degrees of re-distribution: those who are more likely to believe that income is a result of “luck and connections” are more likely to support redistribution (Alesina & Angeletos, 2005).
• Early adolescents begin to develop a sense of fair inequality; younger children tend to be strict egalitarians (Almas et al., 2010)
Inequality, Inequity and Dishonesty
• Inequality in many cases is often confounded by inequity (unfairness). Inequality can in principle be fair or unfair.Under BJW, unfairness might trigger a redistributive reaction.
• Our argument is that if the income distribution is considered to be unfair, citizens are more likely to view circumvention of the “rules of the game” – that is dishonesty and corruption - as justified.
Meritocratic fairness honestyMeritocratic unfairness dishonesty
Related Literature
• In Hoffman et al. (1994), subjects earn right (quiz performance) to be proposer in ultimatum game.
• Zizzo (2003) “Inequality and procedural fairness in a money burning and stealing experiment”.
• Almas et al. (2010) modified dictator game in which endowment is earned through an effort task
• Rustrom & Williams (2000), investigate preferences for redistribution after earning money in a “Tower of Hanoi task” (meant to differentiate effort and productivity)
• Konow et al. (1996, 2000, 2005 etc) origin of endowment and PGG contribution, “accountability principle
• Ruffle (1997): exogenous (coin flip) vs. endogenous (skill-testing contest) endowments in dictator and ultimatum games
Experimental Details
• Experimental sessions: – University of Bologna, Forlí Campus
(June, 2011 and February 2013): 164 subjects
– Stony Brook University, NY (April and November, 2012): 144 subjects
• Average payments: about €11.50 at Forlí and about $17 at SBU
• Computerized experiment (z-Tree)• Duration: 30-40 minutes
Experimental Design
Equity (Fairness)
EqualityEE EI
UE UI
• Three stages:– Stage 1: Real-effort task to measure
performance/effort and assign initial endowments
– Stage 2: Dishonesty stage (in pairs)– Stage 3: Real-effort task as in Stage 1
• Between-subjects manipulation of initial endowments’ allocation and pairing:
Stage 1: Real-effort task
• Real-effort task: counting the occurrences of letters “e” and “c” in each line of a text in German
• A tedious task intended to elicit a sense of “property rights” over performance
Stage 1: effort and payoff
• Subjects were instructed that:– At the end of the task, they will be
divided into two groups, high performers and low performers, based on median performance;
– their performance on the quiz will determine their initial endowment:• 3 out of 4 scenarios: Endowment (high
performer) ≥ Endowment (low performer)• 1 out of 4 scenarios: Endowment (low
performer) ≥ Endowment (high performer)
Treatment EE: Equal & Equitable
• Equal: Both high and low performers get the same payment
• Equitable: In the following stage, subjects will be paired high-high and low-low (randomly)
• Thus, the income distribution is both equal and equitable because all subjects are compensated equally and performed the same
• Control for income effects: two sub-treatments:– EE high:
• High performers receive $10 (€7) and low performers receive $10 (€7) – EE low:
• High performers receive $3 (€2) and low performers receive $3 (€2)
Treatment EI: Equal & Inequitable
• Equal: Both high and low performers get the same payment
• Inequitable: In the following stage, subjects are paired high-low (randomly)
• Thus, the income distribution, while equal, is arguably inequitable because the high performers receive compensation equivalent to the low performers, despite they know that their performance was higher
• Control for income effects: two sub-treatments:– EI high:
• high performers receive $10(€7) and low performers receive $10(€7)
– EI low:• high performers receive $3(€2) and low performers receive $3(€2)
Treatment UI: Unequal & Inequitable
• High performers receive $3 (€2) and low performers receive $10 (€7)
• Subjects are paired high-low (randomly)
• Thus, the income distribution is both unequal and inequitable
Treatment UE: Unequal & Equitable
• High performers receive $10 (€7) and low performers receive $3 (€2)
• Subjects are paired high-low (randomly)
• Thus, the income distribution, while unequal, is arguably equitable because the high performers receive greater compensation for their performance
Stage 2: Dishonesty stage
• Additional payment. Within each pair:• Participant A:
– Owner of “escrow” account of $15 (€10) • Participant B:
– Custodian of the account
Treatment Owner Custodian
EEHigh (Low) performer
High (Low) performer
EI Low performer High performer
UE Low performer High performer
UI Low performer High performer
Stage 2: Private Signals and Misrepresentation
• The custodian receives a series of 25 binary signals
• The signals are generated from a (symmetric) binomial distribution
• Each signal is either red or green, but known only privately to each custodian
• Each signal is meant to direct the custodian as to whether to transfer an amount, $0.60 (0.40€) to herself (green) or leave it for the owner of the account (red)
• It is the recording of the signal that affects payoffs, not the signal itself - therefore the custodian can potentially misrepresent the signal
• Practice rounds with forced input to learn the rules
Dishonesty task
Behavioural hypotheses
1) Procedural unfairness induces more dishonesty: UI > UE
2) Stronger effect in USA than in Italy, since American subjects should be more sensitive to meritocracy (WVS)
• Dishonesty in US: UI ≥ EI > EE ≈ UE• Dishonesty in Italy: UI > EI ≈ EE ≈ UE
Results: rate of honesty
(No difference between EE high (EI high) and EE low (EI low) we pool the data)
• In aggregate, American subjects were more honest than Italian (Mann-Whitney p = 0.026) mainly driven by EE and UE treatments
Two Types of Misrepresentation
• negative dishonesty: reporting a signal as green when it is in fact red
• positive dishonesty: reporting a signal as red when it is in fact green
• as expected, we find much more negative dishonesty than positive dishonesty
Results: negative dishonesty
• In aggregate, no difference between Italy and US
Results: positive dishonesty
• In aggregate, US > Italy (p = 0.027)
Results: custodian’s earnings
• Italy: no difference across treatments
Random Effects Logit (Italy and US)
ITALY US
b p b p
Red signal(t) 5.112**** 0 4.321**** 0
Red Signal (t-1) -0.271 0.167 -0.416** 0.016
Red Signal (t-1)+(t-2) -0.009 0.971 0.142 0.481
Red Signal×UI -1.575*** 0.009 -1.082** 0.016
Red Signal×UE -0.415 0.547 1.417** 0.027
Red Signal×EI -0.615 0.239 -1.188*** 0.004
UI 0.291 0.715 -0.846 0.215
UE -0.398 0.635 -1.287* 0.061
EI 0.164 0.8 -0.741 0.213
Effort -0.106 0.743 -0.207 0.428
Period -0.006 0.635 -0.009 0.396
Constant -3.059** 0.011 -0.753 0.471
Obs 1656 1886
• Dependent variable: public signal (1 = red, 0 = green)
To sum up
• We observe statistically significant differences between the Italian and the American sample
• In the US, dishonesty is triggered mainly by perceived inequity/unfairness
• In Italy dishonesty is higher on average, but is almost unrelated to equity/fairness
Meritocracy and honesty: Survey Evidence
• Data used from the World Values Survey across three waves
• Dependent variable(s): on a scale of 1-10, how justifiable is:– cheating on one’s taxes if you have the chance – accepting a bribe in the course of your duties
• Chief explanatory variable is, on scale of 1-10:– 1: “In the long run, hard work usually brings a
better life.”– 10: “Hard work does not generally bring
success – it is more a matter of luck and connections.”
Multi-level model: results
• Greater degrees of (perceived) inequity and inequality (at the national level) are associated with a greater willingness to circumvent micro-level rules (accept bribes, cheat on taxes), even when controlling for income and corruption at the national level
• This observational study shows that these factors are associated with one another
• Our experimental results show that in the lab (and especially in the US) the inequity of the income distribution is associated with a greater degree of dishonesty, even when holding constant the inequality of the distribution.
Random Effects Logit (All)
• Dependent variable: public signal (1 = red, 0 = green) b p
Red signal(t) 4.330**** 0
Red Signal (t-1) -0.339*** 0.009
Red Signal (t-1)+(t-2) 0.068 0.657
Red Signal×UI -1.223**** 0.001
Red Signal×UE 0.66 0.149
Red Signal×EI -0.932*** 0.004
Red Signal×Italy 0.723*** 0.007
Italy -1.361**** 0
UI -0.353 0.489
UE -0.99* 0.061
EI -0.251 0.56
Effort -0.117 0.559
Period -0.007 0.364
Constant -1.354 0.086
Obs 3542
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