1. Truth in Giving: Experimental Evidence on the Welfare Effects of Informed Giving to the Poor A Study by Fong & Oberholzer-Gee, 2011 Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013

2. Motivation Individuals prefer to support recipients, who are not personal responsible for their predicament (e.g. people with physical disability) Information about the background of needy people can affect how generous a donation is  Leads to the research question: „ Are individuals willing to pay for information that allows them to achieve a prefers distribution of income and what are the effects?“ Therefore decisions in the context of costly endogenous information are examined Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 2

3. Experimental Design I - Participants of the experiment The experiment is set up as a laboratory standard dictator game Students from Carnegie Mellon University and University of Pittsburgh were asked to be part of the experiment as proposer Real-life welfare recipients, living in public houses in Pittsburgh, were asked to attend to the group of responder In a prior survey, they were asked about their background and grouped by their self-assessment Here two groups were set up: people with physical disability and people consuming drugs and alcohol Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 3

4. Experimental Design II – Different Treatments Main Treatment: Dictators know they are randomly paired with a „low-income public housing resident and that both groups (disability and drugs) are of equal size They have the possibility to play a $10 dictator game without further information or pay $1 to learn about their recipient and allocate the $9 after Control Treatments: Subjects have an endowment of $10 and receive the type of the recipient for free Subjects have an endowment of $10 and get no further information Subjects have an endowment of $9 and receive the type of the recipient for free Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 4

5. Results I Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 5

6. Results II Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 6

7. Results III Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 7

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12. Results IV Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 12

13. Conclusion A group of donors is willing to pay for information to achive a distribution of income that comes close to ist preferences If information are given, the recipients of the preferd group receive more If information are endogenious, all types of recipients are worse off The marginal effect of knowing that the recipient is a disable person is positiv, independelty if information are given or have to be bourght Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 13

14. Relevance of the Study The results of the study have implications for governments and NGOs that try to increase the financial and political support for transfer programs Desirable: Donors receive free information indicating their recipient is disable Information is costly Recipients are heterogeneous  Credible signals of deservedness are needed Example: U.S. Social Security program Entitlement program in which transfers are tied to prior earnings of the recipient Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 14

15. References Fong, Christina, and Felix Oberholzer-Gee (2011). "Truth in Giving: Experimental Evidence on the Welfare Effects of informed Giving to the Poor." Journal of Public Economics 95, 5-6, 436-444. Julia Rechlitz | Experimental and Behavioral Economics | 17.06.2013 Seite 15