Moral(e) Drift? Economic Hardship and Tolerance Towards Dishonest Behaviour.

Elodie Douarin (UCL)

Abstract : There is a growing literature linking economic shocks to changes in values and social norms. Here, we investigate the possibility that the 2008 economic crisis, largely perceived as the consequences of wrongdoings in the financial sector and to have been poorly handled by governments, has generated a shift in ethical values. We are especially interested in stated tolerance towards dishonest behaviours (such as lying when selling second hand goods or inflating an insurance claim for example). Using data from a survey collected in 2010 (the EBRD LITS2 survey) in 35, mostly East European, countries, we report that respondents directly affected by the 2008 crisis, are systematically more accepting of dishonest behaviours. The effect is small and possibly only correlational, but it is robust to specification change, Oster’s test on unobservable bias and stronger when the dishonest behaviour described negatively impacts the state or businesses rather than citizens. This is consistent with the psychology literature, which suggests that individuals cheat more in contexts where they can self-justify doing so (e.g. here as a compensation for being negatively impacted by the crisis). Simultaneously, citizens who live in areas where the crisis has hit the hardest express a stronger rejection of dishonest behaviour. This effect is larger in magnitude, consistently found across all the behaviours investigated, and more credibly causal, as it is confirmed with a split-sample regression. Again, this is consistent with insights from the psychology literature indicating that respondents exposed to dishonest behaviours committed by individuals perceived as out-group members, will respond by rejecting dishonesty more strongly. Overall, our finding suggests a tightening of moral values after the 2008 crisis in the short-run.

The Terror of History: Solar Eclipses and the Origins of Social Complexity and Complex Thinking

Anastasia Litina (University of Ioannina)
Eric Roca Fernandez (Aix-Marseille Université)

Abstract : This paper revisits the role of human capital for economic growth among non-industrialised ethnic groups. We hypothesize that exposure to rare, natural events drives curiosity and prompts thinking in an attempt to comprehend and explain the phenomenon, thus raising human capital —directly and indirectly. We focus on total solar eclipses as one particular trigger of curiosity and empirically establish a robust relationship between their number and several proxies for economic prosperity: social complexity, technological level, writing and population density. Variation in solar eclipse exposure is exogenous as their local incidence is randomly and sparsely distributed all over the globe. Moreover, unlike other natural phenomena, solar eclipses do not destroy capital, either human or physical. We also offer evidence compatible with the mechanism we propose, finding more intricate thinking in ethnic groups more exposed to solar eclipses. In particular, we study gods’ involvement in human affairs, the play of strategy games and the accuracy of the folkloric reasoning for eclipses.

Export Booms and Labor Coercion: Evidence from the Lancashire Cotton Famine

Mohamed Saleh (Toulouse School of Economics)

Abstract : Price booms in labor-intensive exports are expected to benefit labor. The surging demand for labor can increase labor coercion, though, if labor is relatively scarce. Using a unique natural experiment, the Lancashire cotton famine in 1861-1865 that prompted Egypt to quadruple its cotton output, and a novel data source, Egypt’s population censuses of 1848 and 1868, I document that the cotton famine had a positive impact on labor coercion in rural Egypt. Agricultural slavery emerged, with an influx of imported slaves from Sudan. Owners of large estates confiscated areas with larger (non-slave) local populations. It also had a positive impact on the non-coercive employment in agriculture of local labor. I explain these findings by the scarcity of local labor relative to cotton expansion, and by large landholders' exclusive right to coerce local labor. The findings accentuate the far-reaching unintended consequences of globalization on labor in poorer economies.

Shocks and Norm Adherence

Max Winkler (University of Zurich)

Abstract : Social norms, the shared behavioral standards of one's community, regulate behavior in many contexts and are important determinants of economic development. While all societies have social norms, people in some countries value adherence to the norms more than in others. According to cultural evolutionary theory, the key determinant for why some societies emphasize norm adherence more than others is the experience of negative collective shocks. Evolutionary selection is thought to favor psychological traits that promote cooperation within groups in response to collective negative shocks, including stronger adherence to existing social norms. Based on a stylized model, I test this hypothesis by linking occurrences of natural disasters and significant economic downturns to large-scale survey data from around the world. I find that (i) individuals who have experienced collective negative shocks place more importance in norm adherence today and (ii) individuals who have experienced higher economic growth rates value norm adherence less.