A war is forever: The long-run effects of early exposure to World War II on trust
Published in “European Economic Review”
Co-authored with F. Salustri
This paper examines the long-term effect of conflict on trust by using changes in places and timing of combats during World War II. We focus on the pre-school period, an important life stage for the formation of trust and an age where war exposure may persist throughout life. We find robust evidence that individuals exposed to combats in the first six years of life display lower trust and social engagement well into adulthood. In light of the well-known relationship between trust and collective action, our results lend credence to the theory that violent conflict inhibits well-functioning government in long run.
Enhancing Capabilities Through Credit Access: Creditworthiness As a Signal of Trustworthiness Under Asymmetric Information
Published in “Journal of Public Economics”
Co-authored with L. Becchetti.
Creditworthiness and trustworthiness are almost synonyms because, under asymmetric information, the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness/trustworthiness nexus in an investment game experiment on a sample of participants/non-participants in a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. The first- and second-order beliefs of trustees are also consistent with this picture. Our findings then show that MF participants appear more trustworthy and this may help microfinance to work. A related consequence is that, if (and only if) borrower’s trustworthiness is not public information, the mere loan provision acts as a reputation enhancing signal increasing the borrower’s attractiveness as a business partner. In such case we have a channel through which a private financial intermediary contributes to the provision of a public good like information, thereby reducing the adverse consequences of market failures on the creation of economic value.
Past performance and entry in procurement: An experimental investigation
Published in “Journal of Economic Behaviour and Organization”
Co-authored with J. Butler, E. Carbone & G. Spagnolo
This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer.
Blessed are the First: The Long-Term Effect of Birth Order on Trust
Published in “Economics and Human Biology”
Co-authored with R. Zotti
The renewed interest by the economic literature in the effect of birth order on children’s outcomes has neglected trust as a long-term output of familial environment. Acknowledging childhood as a crucial stage of life for the formation of social preferences, we go deeper into the early-life determinants of trust, a widely recognized driver of socio-economic success. We analyze if and how differences in the order of birth predict heterogeneous self-reported trust levels in Britain. We draw hypotheses from psychology, economics and sociology, and test alternative explanations to the association between birth order and trust. Relying on an index measuring birth order independently from sibship size, we find a negative and robust effect of birth order, with laterborns trusting less than their older siblings. This effect is not accounted for by personality traits, strength of family ties, risk aversion and parental inputs. It is only partially explained by complementary human-capital outcomes, and it is robust when we use alternative dependent variables and control for endogenous fertility. Multilevel estimates suggest that trust is mostly driven by within- rather than between-family characteristics. The effect of birth order is eclipsed by education outcomes only for women, while it is counterbalanced by mother’s education for the entire sample, thereby leading to relevant policy implications.
Disaster, Aid and Preferences: The Long-run Impact of the Tsunami on Giving in Sri Lanka
Published in “World Development”
Co-authored with L. Becchetti & S. Castriota.
Do natural disasters produce effects on preferences of victims in the long-run? We test the impact of the tsunami shock on generosity of a sample of Sri Lankan affected/unaffected microfinance borrowers seven years after the event. Specifically, we test the effect of the shock at the extensive margin by comparing damaged with non-damaged individuals in terms of giving and expected giving in a dictator game. Moreover, at the intensive margin, we compare the participants based on the amount of damage experienced and recovery aid received. The advantage of this last comparison is that differences in observables between the groups are minimized. We reduce further identification problems by selecting a random sample of damaged and non-damaged borrowers belonging to the same microfinance organization who are, therefore, likely to share some important common traits that are usually unobservable to researchers. We complete our identification strategy with weighted least squares, instrumental variable estimates and a sensitivity analysis on the exogeneity assumption. The main findings of the paper support the hypothesis that the shock affects participants’ preferences in the long-run. First, the tsunami negatively affects generosity at the extensive margin as those who suffered at least one damage give and expect less than those who did not. Second, while large recovery assistance does not directly affect giving and expected giving, it increases especially the latter indirectly, i.e., when interacted with the number of damages. Our results reconcile that part of the literature showing evidence of natural shocks having a detrimental effect on social preferences (Fleming et al., 2011; Cassar et al., 2013) with that supporting, instead, a positive link (Solnit, 2009; Whitt and Wilson, 2007; Cassar et al., 2011). Furthermore, since our study focuses on the long-run impact of a natural disaster, previous results on short-run effects are not necessarily inconsistent with ours.
Fertility and Life Satisfaction in Rural Ethiopia
Published in “Demography”
Co-authored with G. Fuochi & L. Mencarini
Recently there has been strong interest in the link between fertility and subjective well-being, though the focus has centered on developed countries. For poorer countries, in contrast, the relationship remains rather elusive. Using a well-established panel survey, the Ethiopian Rural Household Survey (ERHS), we investigate the empirical relationship between fertility and life satisfaction in rural Ethiopia, the largest landlocked country in Africa. Consistent with the fertility theories for developing countries and with the socio-demographic characteristics of rural Ethiopia, we hypothesize that this relationship varies by gender and across life stages, being more positive for men and for parents in old age. Indeed, our results suggest that older men benefit the most in terms of life satisfaction from having a large number of children, while the recent birth of a child is detrimental for women’s subjective well-being during reproductive age. Endogeneity issues are addressed by using lagged life satisfaction in OLS regressions, through fixed effect estimation and the use of instrumental variable.
Violence, trust, and trustworthiness: evidence from a Nairobi slum
Published in “Oxford Economic Papers”
Co-authored with L. Becchetti & A. Romeo.
We test with a field experiment in a Nairobi slum whether violence suffered during the 2007 political outbreaks affects trustworthiness when interethnicity becomes salient and participants face opportunism in common pool resource games (CPRGs) between two subsequent trust games (TGs). Our findings do not contradict previous one-shot results but qualify and extend them to a multi-period setting, enriching our understanding of the effects of violence on social preferences. More specifically, the victimized exhibit higher trustworthiness in the first trust game but also a significantly stronger trustworthiness reduction after experiencing opportunism and interethnicity in the CPRG game.
Natural Disasters and Social Preferences: The Effect of Tsunami-Memories on Cheating in Sri Lanka
Published in the “Journal of Development Studies”
Through a field experiment in Sri Lanka I analyze the role of experimentally-induced memories of 2004 tsunami on behavior in a trust game in which personal notions of cheating are elicited. Micro-finance borrowers were randomly assigned to a treatment (control) group consisting in watching a video about the calamity before feel cheated; in a survey they selected whether the video mostly reminded about solidarity, looting or the calamity experience. Results suggest a differential impact of emotional stimuli induced by the video-treatment on trustors’ definition of cheating and trustees’ intentional cheating. Among the treated, the probability trustors define cheating as a non-negative return on investment (i.e. receive no more than what invested) and trustees satisfy trustor’s cheating notion (i.e. return at least what makes him/her not feel cheated) is higher when recalling solidarity than when looting and/or the calamity. As expected, there are no significant emotional effects of the video on control group’s behavior. If the trust game replicates real investment decisions, identifying the channels through which emotional memories of a past shock affect behavior offer important insights on what hinders socio-economic transactions within post-disaster areas.
The Cultural Foundations of Happiness
Published in “Journal of Economic Psychology”
Co-authored with A. Aassve, G. Fuochi & L. Mencarini.
The paper provides a framework for how culture affects happiness. According to self-determination theory, well-being is driven by the satisfaction of three basic psychological needs: autonomy, relatedness and competence. We assess if, and to what extent, trust and the values of obedience and respect influence Europeans’ satisfaction of these needs, controlling for income and education. We find a positive and significant impact for generalized morality (high trust and respect, low obedience), which is robust to different checks for endogeneity, including instrumental variable regressions at country, regional and individual level. Results suggest that lack of trust, high obedience and low respect not only reduce the wealth of nations, but also constrain the satisfaction of basic psychological needs, thereby hindering the individuals’ fulfilment of happiness.
Childhood exposure to WW2 and financial risk taking in adult life
Published in “Journal of Economic Psychology”
Co-authored with D. Bellucci & G. Fuochi
Adverse childhood experiences might have long-lasting effects on decisions under uncertainty in adult life. Merging the European Survey on Health, Ageing and Retirement with data on conflict events during the Second World War, and relying on region-by-cohort variation in war exposure, we show that warfare exposure during childhood is associated with lower financial risk taking in later life. Individuals who experienced war episodes as children hold less – and are less likely to hold – stocks, but are more likely to hold life insurance, compared to non-exposed individuals. Effects are robust to the inclusion of potential mediating factors, and are tested for nonlinearity and heterogeneity. Moreover, we provide evidence of hedonic adaptation to war, as high and low intensity of war exposure have comparable long-term effects. We also document that war exposure in childhood increases sensitivity to financial uncertainty since exposed-to-war individuals are less likely to hold stocks after periods of high volatility. Finally, we shed light on the most likely mechanism in the relationship between war exposure and financial risk taking – i.e., enhanced sensitivity to uncertainty – and we show that preferences, and not beliefs, channel this relationship.
The impact of health expenditure on the number of chronic diseases
Published in “Health Policy”
Co-authored with L. Becchetti & F. Salustri
We investigate the impact of health expenditure on health outcomes on a large sample of Europeans aged above 50 on individual and country level data. We find a significant negative impact on changes in the number of chronic diseases which varies according to age, health styles, gender, income and education subgroups. Our findings indicate potentially heterogeneous support to health expenditure across interest groups and are robust when we instrument health expenditure with parliament political composition.
Virtuous Interactions In Removing Exclusion: The Link Between Foreign Market Access and Access to Education
Published in the “Journal of Development Studies”.
Co-authored with L. Becchetti & F. Pisani.
We outline a methodology which aims to give an answer to the widespread demand of impact analyses by regulators or by funding agencies which need to evaluate the current and past performance of development projects and may lack time series evidence. We devise a retrospective panel data approach to evaluate the dynamics of the effects of fair trade affiliation on the schooling decisions of a sample of Thai organic rice producers across the past 20 years. We find that the probability of school enrolment in families with more than two children is significantly affected by fair trade affiliation years. We try to ascertain whether our finding is robust to endogeneity of producers’ choices of local cooperative affiliation and adoption of organic techniques. The significant difference between pre- and post-fair trade affiliation performance documents that fair trade participation generates a significant break in the schooling decisions of affiliated households.
Voluntary Work, Health and Subjective Wellbeing: a Resource for Active Ageing
Published in “Kyklos”
Co-authored with L. Becchetti & M. Di Febbraro
The hypothesis that active community involvement is beneficial for health finds strong support in the medical literature and in most policy guidelines for active ageing in OECD countries. We testit empirically documenting that lagged voluntary work is significantly correlated with later changes in various aggregated and disaggregated health indicators. However, when controlling for panel attrition, endogeneity and reverse causality, the positive effect of voluntary work remains robust only for a limited number of indicators. We calculate the monetary equivalent of health-related subjective wellbeing benefits of volunteer work with the compensating variation approach and compare it with benefits in terms of the social value of increased longevity.
Sociability, Altruism and Well-Being
Published in “Cambridge Journal of Economics”
Co-authored with L. Becchetti & L. Corrado.
We provide non experimental evidence of the relevance of sociability on subjective wellbeing by investigating the determinants of life satisfaction on a large sample of Europeans aged above 50. We document that voluntary work, religious attendance, helping friends/neighbours and participation to community-related organizations affect positively and significantly life satisfaction. We illustrate the different impact that some sociability variables have on eudaimonic versus cognitive measures of subjective wellbeing. Our empirical findings discriminate among other regarding and self-regarding preferences as rationales explaining such behaviour. We document that different combinations between actions and motivations have different impact on life satisfaction thereby providing support for the relevance of these specific “contingent goods” and to the literature of procedural utility. Our findings are confirmed in robustness checks including refinements of the dependent variable, instrumental variables and sensitivity analysis on departures from the exogeneity assumption.
Cooperative membership as a signal of trust and trustworthiness: results from a field experiment
Published in the “Journal of Development Studies”
Co-authored with L. Becchetti & S. Castriota.
Cooperative affiliation implies a series of actions in which members are first movers and trust that the organisation will reciprocate them. Acceptance of a member and her/his survival in the organisation suggests as well that the member has been regarded as trustworthy by the latter. Based on these considerations we assume that cooperative membership is a trust and trustworthiness reinforcing device and, as such, it affects (in an investment game setting) both (trustors and trustees) contributions and beliefs, thereby generating payoff enhancing effects. Based on results of our field experiment we do not reject this hypothesis when we look at trustors’ contribution, their beliefs on trustees’ responses and trustees’ first and second order beliefs. However, trustworthiness of members fails to meet the expectations of non member trustors who rely on a relatively higher contribution from them vis à vis non members. In this respect our findings document an in group bias since, contrary to non members’ expectations, the positive affiliation- trustworthiness link works only between coop members.
Legal Origins and Corporate Social Responsibility
Published in “Sustainability”
Co-authored with L. Becchetti & R. Ciciretti
The legal origin literature documents that civil and common law traditions have different impacts on economic outcomes. We contribute to this literature by formulating and testing hypotheses on the effect of legal origins on corporate social responsibility, overall and in different specific dimensions. We find that, net of industry-specific effects, companies in common law countries score higher in corporate governance and community involvement, while those in countries belonging to the French legal tradition of civil law do better in human resources. We also observe no significant differences in terms of environmental protection among companies in civil and common law countries, which we attribute to a progressive convergence towards common industry sustainability standards.
Education and Health in Europe
Published in “Applied Economics”
Co-authored with L. Becchetti & F. Pisani
The productive and allocative theories predict that education has positive impact on health: the more educated adopt healthier life styles and use more efficiently health inputs and this explains why they live longer. We find partial support for these theories with an econometric analysis on a large sample of Europeans aged above 50 documenting a significant and positive correlation among education years, life styles, health outputs and functionalities. We however find confirmation for an anomaly already observed in the US, namely the more educated are more likely to contract cancer. Our results are robust when controlling for endogeneity and reverse causality in IV estimates with instrumental variables related to quarter of birth and neighbours’ cultural norms.
Market Access, Organic Farming and Productivity: the Effects of Fair Trade Affiliation on Thai Farmers Producer Groups
Published in the “Australian Journal of Agricultural and Resource Economics”.
Co-authored with L. Becchetti & G. Gianfreda.
The study analyses the impact of Fair Trade (FT) and organic farming on a sample of FT rice producers in Thailand. It finds that per capita income from agriculture is positively and significantly affected by years of organic certification and FT affiliation. The estimated FT and organic certification contributions to producers’ economic well-being are higher when account is taken of the relatively higher proportion of self-consumption among affiliated farmers. But the per capita income effect does not translate into higher productivity owing to a concurrent increase in hours worked.
The Controversial Effects of Microfinance on Child Schooling: A Retrospective Approach
Published in “Applied Financial Economics”
Co-authored with L. Becchetti.
Two crucial problems when research agencies or donors need to assess empirically the microfinance/children education nexus on already operating organizations are lack of availability of panel data and selection bias. We propose an original approach which tackles these problems by combining retrospective panel data, fixed effects and comparison between pre and post-treatment trends. The relative advantage of our approach vis-à-vis standard cross-sectional estimates (and even panels with just two time periods) is that it allows to analyse the progressive effects of microfinance on borrowers. With this respect our paper gives an answer to the widespread demand of impact methodologies required by regulators or by funding agencies which need to evaluate the current and past performance of existing institutions. We apply our approach to a sample of microfinance borrowers coming from two districts of Buenos Aires with different average income levels. By controlling for survivorship bias and heterogeneity in time invariant and time varying characteristics of respondents we find that years of credit history have a positive and significant effect on child schooling conditional to the borrower’s standard of living and distance from school.
Social capital dynamics and collective action: the role of subjective satisfaction
Published in “Environment and Development Economics”
Co-authored with L. Becchetti & S. Castriota.
In low income countries grass-root collective action is a well known substitute for government provision of public goods. In our research we wonder what is its effect on the law of motion of social capital, a crucial microeconomic determinant of economic development. To this purpose we structure a “sandwich” experiment in which participants play a public good game (PGG) between two trust games (TG1 and TG2). Our findings show that the change in trustworthiness between the two trust game rounds generated by the PGG treatment is crucially affected by the subjective satisfaction about the PGG rather than by standard objective measures related to PGG players’ behavior. These results highlight that subjective satisfaction after collective action has relevant predictive power on social capital creation providing information which can be crucial to design successful self-organized resource regimes.
Credit Access and Life Satisfaction: Evaluating the Non Monetary Effects of Micro Finance
Published in “Applied Economics”.
Co-authored with L. Becchetti.
Microfinance Institutions (MFIs) are used to claim that their impact goes beyond money since rescuing from exclusion uncollateralized poor borrowers significantly affects their dignity, self-esteem, social recognition, future economic perspectives and, through it, life satisfaction. Our article aims to verify the validity of this claim by evaluating whether access to microfinance loans has significant direct impact on life satisfaction beyond its indirect impact via current income changes. Empirical findings on a sample of poor borrowers in the suburbs of Buenos Aires show that, after controlling for survivorship, selection and interview bias, microfinance membership has a significant and positive effect on life satisfaction.
Public disclosure of players’ conduct and Common Resources Harvesting: Experimental Evidence from a Nairobi Slum
Published in “Social Choice and Welfare”
Co-authored with L. Becchetti & G. Degli Antoni.
We evaluate the effect of information disclosure (feedback on individual contributions and payoffs) on players’ behavior in a multi-period common pool resource game experiment run in an area of notably scarce social capital, such as the Nairobi slum of Kibera. We document that cooperation significantly declines over rounds when such information is revealed. Our results are consistent with the Ostrom (J Econ Perspect 14:137–158, 2000) hypothesis that, in the absence of formal punishment rules, the availability of information about individual behavior makes common resource management more difficult and tragedy of the commons easier.
Preferences for Well-Being and Life Satisfaction
Published in “Social Indicators Research”
Co-authored with L. Becchetti
We test whether preferences over different well-being domains significantly correlate with life satisfaction. A sample of respondents is asked to simulate a policymaker decision consisting in allocating hypothetical financial resources among 11 well-being domains. We find that the willingness to invest more in the economic well-being domain is negatively correlated with life satisfaction. We argument that this evidence, while not excluding other rationales, is consistent with the utility misprediction hypothesis suggesting that individuals make systematic errors in estimating the well-being implied from their choices. Subsample estimates document that the less educated are more affected by the problem.
Does Fair Trade Help to Avoid Poverty Traps? The Effect of Fair Trade on Producers’ Income and Schooling Decisions
Published in “Italian Economic Review”
Co-authored with L. Becchetti, F. Pisani & E. Portale
We evaluate the impact of fair trade (FT) affiliation on a sample of (treatment and control) producers from two different fair trade projects in a poorer and a relatively better off area of Peru. In both projects, we find that producer’s income is significantly associated with years of affiliation after controlling for spillovers/externalities. Estimates on the determinants of schooling decisions and education gap on backcast panel data are not at odds with the luxury axiom hypothesis, showing that the impact of affiliation years on the dependent variable is stronger in the project with relatively better-off producers. This result is also consistent with the relatively higher returns on (parental) education estimated in the same project.