“We are all born brave, trusting and greedy, and most of us remain greedy.” Mignon McLaughlin (1966)

Larissa Bătrâncea Universitatea Babeş-Bolyai, Romania Anca Nichita Universitatea Babeş-Bolyai, Romania IAREP/SABE/ICABEEP CONFERENCE Higher School of Economics 1-3 September, Moscow 2010

World Value Survey Data COUNTRY TRUST DEGREES TOTALUNITED STATES BULGARIAROMANIA Trust completely 1,2%0,3%2,3%1,3% Trust a little22,1%40,2%17,6%11,6% Not trust very much 49,5%45,5%56%48,7% Not trust at all27,1%14%24%38,4% Total100%1214 (100%)966 (100%)1670 (100%) Table 6. “Trust in completely strangers” levels

The link between trust reported in surveys and economic growth Knack & Keefer (1997): find empirical support that trust positively affects growth rates, based on World Value Survey question Zak & Knack (2001): income inequality and ethnic diversity affect trust on a national level

Motivation  To compare trust and trustworthiness levels with those in other countries (i.e. Bulgaria, USA) Koford (2003): compares results with Berg, Dickhaut & McCabe (1995) data; Bulgarians had higher levels of trust and trustworthiness, leaving the game with more money than the Americans did Cox (2004): American subjects display high levels of trust and trustworthiness  To identify differences between data reported in surveys (World Value Survey) and economic behavior

Motivation  To study the influence of gender on economic decisions Chaudhuri & Gangadharan (2002): males were more altruistic in the role of senders Buchan & Croson (2004): gender didn’t influence senders transfer intentions; in turn, female receivers stated to be more trustworthy than men did Buchan, Croson & Solnick (2008): males showed more trust than females; females were more trustworthy

Research Questions: 1)What are the trust and trustworthiness levels in Romania? 2) Does gender influence subjects‘ behavior? 3) What is the relationship between experimental data and survey data?

Experimental Design trust game one shot

Subjects from rooms A and B are paired randomly Room A Room B

Room A 10 lei Each subject in room A receives an endowment of 10 lei.

Room A Room B n lei Each subject in room A decides how much of the 10 lei to sent her partner in room B

Room A Room B n x 3n x 3 n x 3n x 3 The amount sent is tripled

Room A Room B r lei Each subject in room B decides whether to return something to her partner in room A

At the end of the game First mover’s earning = 10 – n + r First mover’s earning = 10 – n + r Second mover’s earning = 3 x n - r

Hypotheses Trust and trustworthiness levels in Romania differ from those in other countries Gender influences economic behavior There is a difference between survey data and experimental data

Subject pool sample Gender: 39 females, 27 males Age: between 20 and 22 Education: undergraduate students in Economics Number of participants: 68

FEED-BACK FROM SUBJECTS “Experiments like this should be organized more often, because students actually learn how to handle their potential business partners and what to expect from them.” “This is a useful experience. It teaches you whom and how much to trust, in the likelihood of starting a business deal in the future.” “What a fool! Had he given me more, we both would have been better off.” “This experiment has thought me that, if you are a businessman, you cannot make a decision without taking your partner into account.”

Average transfers comparison RESULTSRESULTS

RESULTSRESULTS

15% cautious17% blind trust24% generous44% egalitarians 2% homo oeconomicus 12% egalitarians15% generous71% less than half Transfer Patterns Senders Receivers RESULTSRESULTS

Gender effects on transfers  1. Senders transfers OLS: gender does not influence transfers ( t = 0,736; p = 0,467) 2. Receivers transfers OLS: gender does influence transfers ( t = 1,843; p = 0,075) RESULTSRESULTS

…back to the World Value Survey RESULTSRESULTS

Instead of conclusions, …Crossroads of thoughts

How do we explain the difference between high levels of trust found through experimental games in Eastern Europe and low levels of trust reported by surveys (World Value Survey)? Does the trust game really measure trust? Open questions