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© The European Bank for Reconstruction and Development, 2005.Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

Economics of TransitionVolume 13 (3) 2005, 445–472

Blackwell Publishing, Ltd.Oxford, UKECOTThe Economics of Transition0967-0750© The European Bank for Reconstruction and Development, 20057Original Article

How Belief Systems and Mistrust Shape Responses To Economic IncentivesHoff and Pandey

Opportunity is not everything

How belief systems and mistrust shape responses to economic incentives

Karla Hoff and Priyanka Pandey*

*

The World Bank, E-mail: [email protected] or [email protected].

Abstract

We experimentally investigate in village India how belief systems that hierarchizesocial groups affect the groups’ responses to economic opportunities. Earlier wefound that making caste salient hurt low caste performance both absolutely andrelative to the high caste’s. To examine the possible role of mistrust, we manipulatethe scope for discretion in rewarding performance. When offered a gamble in whichsuccess mechanically triggers rewards, making caste salient has no significant effect.Instead, it is in the case with scope for discretion that making caste salient createsa large caste gap in the proportion of subjects who refuse the gamble.

JEL classifications: C90, O17, Z13.Keywords: Social norm, experiment, caste, inequality.

We are grateful for helpful comments to participants in seminars at MIT and Boston University and at theMacArthur Norms Network and the Cornell-MIT-LSE Conference on ‘Behavioral Economics, Public Economicsand Development’. We thank Ken Sokoloff for helpful comments on an early draft, and an anonymous refereefor many constructive suggestions. We thank the World Bank and the MacArthur Network on Inequalityand Economic Performance for financial support.

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1. Introduction

Subordination of one people by another is undertaken not only by force; it alsohas a cultural component. This suggests the possibility that when the coercive struc-tures that enforce subordination are dismantled, the cultural beliefs remain andplay a role in making inequality persistent. In this paper, we use the caste systemof India as a setting in which to experimentally investigate that possibility.

Historians at least since Arnold Toynbee (1934) have noted that the dominanceof one social group over another sets in motion a process of cultural distancing andhierarchizing. A case in point is Latin America, in which

‘[t]he mere act of extending a claim of possession over American Indians. . . changed Spaniards’ representation of Indians’ nature. The signs of civilityand of shared humanity marveled at by Spaniards in their first encountersfaded to insignificance after the formal act of possession . . .’ (Benton, 2002 p. 12)

As the structure of legal authority that enforces subordination is established, itbecomes intertwined with a belief system that represents the subordinate socialgroup as inherently inferior.

1

That belief system may continue to shape social iden-tities, perceptions, and expectations long after state-sanctioned mechanisms ofsubordination have been dismantled. In many parts of the world, high inequalitybetween social groups, which historical legal barriers to equal opportunity helpedto create, has indeed persisted long after the most debilitating forms of discrimina-tion have ended.

2

This has led some scholars to ask whether and, if so, by whatmechanisms, belief systems contribute to the persistence of group inequality.

There are many possible channels of influence from belief systems to persistentinequality. One is statistical discrimination: under some circumstances, employers’prior beliefs in group differences (where none inherently exist) are self-fulfilling (areview can be found in Arrow, 1998). Another is stereotype threat or social identitysusceptibility

.

Many studies have documented that when a particular social iden-tity is made salient, performance in a domain that is stereotyped is altered in thedirection predicted by that stereotype.

3

Past research on socio-cultural influences

1

Detailed historical studies of this process – which includes both spontaneous elements alluded to in thequotation above by Benton, and also a deliberate role by the dominant group in myth-making – are Lorcin1995 (on Algeria) and Dirks 2001 (on India).

2

Deep economic divides persist between blacks and whites in the United States (Loury 2002, Appendix),between former ‘untouchable’ castes and all other castes in India (Desphande, 2002), and between indigenousgroups and non-indigenous groups in Latin America (Psacharopoulos and Patrinos, 1994).

3

In a remarkable and well-known study (Steele and Aronson, 1995), black and white college students in theUnited States were asked to take a test composed of items from the verbal Graduate Record Exam (GRE). Inthe control condition, the subjects were asked to fill out a questionnaire indicating their major, gender, andother variables (but not race). In another condition, they were asked to also indicate their race. This simplemanipulation – evoking the race of the person – elicited conformity to the US stereotype of blacks as lessintelligent than whites. The SAT-adjusted mean scores of the blacks were far worse than those of the whites inthe race-prime condition, whereas in the no-race-prime condition their scores slightly exceeded those of whites.

How Belief Systems and Mistrust Shape Responses To Economic Incentives

447

on performance has focused on self-stereotyping.

4

In this paper, we consider anadditional way that a belief system that represents a social group as inherentlyinferior might be self-fulfilling: belief systems may lead individuals to expect theirefforts to be rewarded in a biased way; mistrust then undermines motivation. Thisleads to the hypothesis that, for a social group viewed as inferior, making socialidentity salient would have a larger effect on behaviour when there is scope fordiscretion in evaluating and rewarding performance than when there is no discre-tion. No such difference would be observed for the social group that is not stigma-tized. This is indeed consistent with the findings that will be presented below forlow- and high-caste individuals in India.

We should note, at least parenthetically, that an expectation of bias by the targetof a stereotype would be rational in light of the experimental evidence on the effectof stereotypes on perception. In their review of the literature in cognitive psychology,Hamilton and Sherman (1994) find that

‘The perceiver is more likely to attend to and notice stereotype-consistent infor-mation, to make stereotype-consistent inferences, to recall stereotype-consistentinformation, and so on. The overall consequence is that the perceiver “sees” a patternof information that seems to provide evidence for the “validity” of the beliefsthat themselves influenced the way the information was processed’ (p. 48).

5

‘In total, these various processes demonstrate that one of the primary functionsof stereotypes is self-maintenance’ (p. 37).

Stereotypes thus appear to serve as cognitive structures that guide informationprocessing in a self-confirmatory way.

6

4

One exception is Cohen and Steele (2002). They find that ‘barriers of mistrust’ affect the way that targetsof negative stereotypes experience social interactions.

5

A recent experiment by Stone, Perry and Darley (1997) provides a nice example. Their title captures the mainfinding: ‘White men can’t jump: Evidence for the perceptual confirmation of racial stereotypes following abasketball game’. In the experiment, all participants (who were white) listened to the same running accountof an athlete’s basketball performance on the radio. Half the participants were led to believe that the targetplayer was white, and half that he was black. A survey that the participants filled in after the end of the radiobroadcast indicates that information was less likely to be absorbed if it was discordant with the prevailingUS stereotypes of blacks as poor intellects but strong athletes compared with whites. The white target playerwas perceived as exhibiting less natural athletic ability but more ‘court smarts’, whereas the black target playerwas perceived as exhibiting fewer court smarts but more natural athletic ability. These conflicting beliefswere generated through nothing more than manipulating the beliefs of viewers about the racial identity of theathlete.

6

A recent study of the effect of stereotyping on judgment finds that prison inmates with more Afrocentricfeatures receive harsher sentences than those with less Afrocentric features, controlling for race and criminalhistory (Blair, Judd and Chapleau, 2004). A theory of the effects of bias on information processing is in Rabinand Schrag (1999). A theory of the effects of ‘categorical cognition’ – judging individuals not by their owncharacteristics but by the average characteristics of the group with which they belong – is in Fryer andJackson (2002).

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Two sets of results will be presented below. In Experiment 1 (summarized fromHoff and Pandey, 2004), 321 low-caste and 321 high-caste junior high school malestudents in north India are asked to solve mazes under various incentive schemes.In some cases, caste is made salient though public announcement of the children’scaste. When this occurs, the average performance of low-caste individuals is signif-icantly worse – both relative to their performance when social identity is not madesalient and relative to the performance of the high caste.

To examine the possible role of mistrust, in Experiment 2 we devised a conditionthat manipulates the scope for judgment in rewarding performance. We recruited anew set of 270 low-caste and 270 high-caste junior high school boys in north India.When asked to accept or reject a gamble in which there is no scope for judgmentby an experimenter, we find that making caste salient does not produce a caste gap.Instead, it is in the case where there is scope for judgment that making caste salienthas an effect. Analysis of the results offers some support to the hypothesizedprocess underlying the underperformance of low-caste individuals in Experiment 1.

2. Notes on the caste system in India

As background to the experiments, we provide brief notes on the caste system.

7

The caste system in India can be described as a highly stratified social hierarchy,in which largely endogamous groups of individuals are invested with differentsocial status and social meaning. The Hindu belief system uses idioms ofpurity and pollution to explain the hierarchy. At the top are the high castes thatare considered to be ‘pure’ – Brahmin, Kshatriya (Thakur) and Vaishya castes. Atthe bottom or, more accurately, beneath the caste hierarchy, are the social groupstraditionally called ‘untouchables’ and historically denied all civil rights.

Caste membership is inherited and a single individual cannot alter it, althoughover the long term the political fortunes of particular groups have been crucialin shaping the ways in which the groups were situated within the caste hierarchy(for illustration, see the historian Nicholas Dirks, 2001, pp. 65–70). Under the oneand a half centuries of British rule, the British exploited the caste system to justify asocial organization that put high castes in administrative positions and maintainedthe low castes in generally oppressive conditions under the authority of localhigh-caste individuals. According to Dirks (p. 9), the caste system was a ‘culturaltechnology of rule’ that sustained British power in India as much as did the powerof superior arms.

After independence in 1947, India abolished the caste system and establishedreservations in government and universities for castes characterized by ‘extremesocial, education and economic backwardness arising out of the traditional practice of

7

A more extensive discussion and references to the literature are in Hoff and Pandey (2004).


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untouchability.’

8

However, the hierarchy of the caste system and the stigmatizationof traditionally untouchable castes remain a very visible part of the society, especiallyin rural north India, as we discuss further below (Section 6).

3. Methodological overview

The objective of the experiments is to determine whether increasing the salience ofcaste identity changes the ability or propensity of low-caste subjects and high-castesubjects to respond to economic incentives. Therefore the experiments confrontthe subjects with an actual economic opportunity. Our data are on performance(Experiment 1) and on the willingness to accept a gamble (Experiment 2), as wevary the salience of caste. In addition, Experiment 2 presents evidence on how thesalience of caste interacts with the discretion or subjectivity that the experimenterhas in rewarding performance.

We chose as subjects 6

th

- and 7

th

-graders in the north Indian state of UttarPradesh.

9

In a household survey conducted in a village near the site of the experiment,we found that 95 percent of children of the lowest caste (Chamar) age 11–12 werein school, whereas the fraction of rural children attending high school in UttarPradesh according to the National Sample survey (1995–96) is 59 percent. Thusthe subjects are likely to be representative of children in north India.

Another problem that needs to be addressed is the generalizability to adultbehaviour of experimental findings using children. We are aware of only oneexperiment that examines the effect of activating a social identity on the behaviourof children. Ambady

et al

. (2001) provide evidence that identity activationaffects children at an early age in a way similar to the effect on college students, asdemonstrated in Shih, Pittinsky and Ambady (1999). There is also a growing exper-imental literature on the economic behaviour of children, which finds in a numberof domains (rational choice behaviour, altruism, and strategic behaviour) only smalldifferences between the behaviour of 11- and 12-year olds and adults.

10

Accordingto Harbaugh, Krause, and Berry (2001), in rational choice behaviuor over consumption,‘college students do no better than 11-year-old children.’

8

Department of Social Justice and Empowerment, Government of India. Scheduled Caste is the officialdesignation of a formerly untouchable caste, which in this paper we refer to as a ‘low’ caste. A second officialdesignation under Indian law is Other Backward Castes, which comprises traditional caste groups that wereranked above the untouchables but which, like them, were relegated to menial tasks that involved providingservice to the higher ranked castes. All other caste groups, which have no official recognition under Indianlaw, we refer to in this paper as ‘high’ castes. In 2001, Scheduled Castes represented approximately 16percent of the total population of India, and 21 percent of the population of the state of Uttar Pradesh (thesite of our experiment).

9

We explain how we recruited children for Experiment 1 in Hoff and Pandey (2004) and for Experiment2 in Section 5 below.

10

See, e.g., Murningham and Saxon (1998) and Harbaugh and Krause (2000).

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The low-caste subjects are all from the Chamar caste. The high-caste subjectsare from the Brahmin, Kshatriya (Thakur) and Vaishya castes.

11

A child’s caste cannotgenerally be discerned from his appearance, although in particular cases a low-castechild might reveal his caste by his manner or his clothing.

The site of the two experiments was the same junior high school in a village incentral Uttar Pradesh, India. For each session we brought subjects into a classroomsix at a time. Except under the caste-segregated condition, described below, eachsession included three low-caste and three high-caste children.

In post-play interviews in Experiment 1, low- and high-caste subjects, respec-tively, reported knowing on average 1.40 and 1.47 of the other five in the group.In Experiment 2, where in every case we drew the six individuals in a session fromsix different villages, the subjects reported knowing none of the other five in thegroup. The six subjects in a given experimental session did not have the possibilityto speak to each other before the experiment took place. Each subject participatedin just one treatment (and in just one experiment).

Three conditions provided a contrast in the salience of caste:

No identity salient.

In this condition, no personal information about participants wasannounced.

Caste announced.

At the beginning of a session, the experimenter turned to each ofthe six participants and stated his name, village, father’s name, paternal grandfa-ther’s name, and caste. The experimenter asked the participant to nod if theinformation was correct.

12

Caste segregated and announced

(Segregated, for short). This condition was the sameas the preceding one except that the six-person group included only low-caste oronly high-caste individuals.

Note that the probability of a combination of six low-caste or six high-castechildren from a random draw of six subjects from all boys in grades 6 and 7 inschools around the site of the study was near zero (less than 0.001). Thus, in thethird condition, the participants are likely to have known that the segregation wasdeliberate.

11

In Experiment 1, Thakur, Brahmin, and Vaishya, respectively constituted 70, 24, and 6 percent of the high-caste subjects. We recruited subjects from one low caste but three principal high castes because severalChamar caste households lived in every village we visited in the area covered by our experiment, whereasnot every village had several households belonging to each of the three high castes.

12

The experimenter used the traditional name, Chamar, for the low caste. This name is still in widespreaduse in the area in which we conducted the experiment. The name Chamar is recorded in the schools’enrolment books. Villagers, including children, commonly refer to a village person by the traditional namefor his caste: a Chamar caste person is referred to as Chamar and a Thakur caste person as Thakur.


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4. Summary of experiment 1 (Hoff and Pandey, 2004

)

In Experiment 1, we asked subjects to solve mazes in two 15-minute rounds undervarious incentive schemes. The incentive was piece rate in the first round butvaried across treatments in the second round. In all treatments, the (objectively)expected payment per maze solved was one rupee (about 2 US cents). Notcounting the show-up fee, the top performers earned 2.5 times the daily unskilledwage in a session that lasted about one hour; average earnings were slightly lessthan one-half the daily unskilled adult wage.

Table 1 and Figure 1 present the average caste gap in Round 2 of each incentivescheme – Piece rate, Tournament (winner-take-all), and ‘Random Winner.’ (Not allincentive schemes were run under all salience-of-caste conditions.) The vertical axisin the figure measures the difference between the average number of mazes solvedby low-caste and high-caste subjects. The first bar in the figure shows that the lowcaste outperform the high caste in the no-identity-salient condition, but not signif-icantly.

13

The announcement of caste reduces the average number of mazes solvedby low-caste subjects under piece rate incentives by 25.2 percent (from 5.72 to 4.28mazes) but does not significantly change high-caste performance. The announcementof caste thus creates a significant caste gap (

−

1.83 mazes,

p

-value = 0.04).

13

To test significance, we used the Mann–Whitney

U-

test, which is a non-parametric test of whether the twosamples come from same population.

Figure 1. Caste gap in mean performance as a function of whether and how caste identity was primed

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Consider next the tournament incentive (see the middle three bars in the figure).Here the announcement of caste reduces the average number of mazes solved by bothlow-caste and high-caste subjects, and there is no significant caste gap in performance.However, moving from the caste announced condition to the segregated conditionsignificantly reduces mean performance of the low caste (

p

-value = 0.01).

14

The

14

Segregation also reduces significantly the performance of the high caste (

p

= 0.02). One reason for thiscould be that while the low caste expect to do worse, the high caste expect to do better because they areviewed as intrinsically worthy and, therefore, they exert less effort.

Table 1. Average number of mazes solved Piece rate incentive

Tournament

Random winner

No identity salient Caste announced

Low caste 5.72 4.28High caste 5.54 6.11Difference between low and high castes 0.18 −1.83

p = 0.86 p = 0.006

N 96 120

No identity salient

Caste announced

Caste segregated

and announced

Low caste 6.80 4.75 3.05High caste 6.83 5.46 4.83Difference between low and high castes

−0.03 −0.71 −1.78p = 0.72 p = 0.26 p = 0.02

N 60 120 66

Caste announced

Low caste 5.40High caste 5.03Difference between low and high castes 0.37

p = 0.61N 60

Note: p-values for differences between castes are based on the Mann–Whitney test.


453

average number of mazes that the

low

caste solves falls from 6.8 when no identityis salient, to 4.75 mazes when caste is announced, to 3.05 mazes in the segregatedcondition (a single caste tournament). In the segregated condition, there is a significantcaste gap in mean performance (

−

1.78 = 3.05 (

low

)

−

4.83 (

high

)), as shown in thefigure (

p

-value = 0.02).The last bar in Figure 1 depicts the caste gap under an incentive scheme called

Random Winner. In this scheme, a person chosen at random from the six players ina session is paid 6 rupees per maze, and all others receive nothing. The mean return permaze solved is thus one rupee, as in all other incentive schemes. Explaining theconcept of randomness was facilitated by the use of slips of paper on which eachparticipant wrote his name. The experimenter’s assistant showed how the slipswould be tossed together in a glass jar, from which one folded slip would be chosenat the end of the experiment. Moving from Piece Rate with Caste Announced to theRandom Winner treatment raises the mean performance of the low caste and therebyeliminates the significant negative caste gap that occurred in Piece Rate with CasteAnnounced. The low caste now outperforms the high caste, but not significantly.

15

The results in Random Winner cannot plausibly be explained by caste differ-ences in risk aversion or in optimism, since the absence of a caste gap in thetournament treatment (no identity salient) suggests that caste groups do not differin that respect. A more plausible explanation, which we explore in our secondexperiment, is that the announcement of caste interacts with the introduction ofrandomness. Low-caste individuals might interpret the introduction of randomnessin choosing the winner as a signal that the experimenter eschews the use of socialidentity in evaluation, and such a signal might raise the low caste participants’subjective expectation of the return to effort. Alternatively, the introduction ofrandomness in choosing the winner might have a pure psychological explanation:randomness implicitly makes caste identity less salient.

We consider one last feature of the data in Experiment 1 – the improvement byplayers between rounds. Figure 2 shows, for each decile, the cumulative proportionof the low caste among all the participants whose Round 2–Round 1 score ranksthem at or above this decile.

16

If there were no caste differences in performance, allgraphs would be at the 50 percent line in the figure. In the two treatments in whichno identity is salient, the graphs are very close to the 50 percent line except in thetop-scoring deciles, where the graphs are generally above the line because the lowcaste is over-represented among the best performers.

15

The

p

-values comparing performance in Round 2 between Random Winner and Piece Rate (no identitysalient) are 0.91 and 0.56 respectively for low and high castes.

16

For example, if the top 20 percent of subjects were to be selected based on performance in Piece Rate, thefigure shows that this would result in a low-caste proportion of approximately 63 percent: the low casteout-performs the high caste at the highest levels of performance. But the comparable figure for Piece Ratewith Caste Announced is 37 percent; in that social context, the low caste is starkly under-represented at thehighest levels of performance.

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Hoff and Pandey

The 50 percent line divides the six graphs fairly cleanly into two groups. Theresults in the no-identity salient condition (indicated by hollow markers), togetherwith results in Random Winner, are in the top half of the figure. The results, exceptRandom Winner, in which caste is announced (indicated by solid markers) are inthe lower half. The Segregated condition (under the tournament incentive) givesthe low caste the lowest representation among all performance deciles, whereasrandomness in the determination of the winner gives the low caste the highestrepresentation.

The experimental results are consistent with two explanations. One is that mak-ing caste identity salient debilitates performance because of a social psychologicalresponse (for example, self-stereotyping). In this view, the boost to low-casteperformance in Random Winner arises because the randomization process makessocial identity less salient. A second explanation is that making caste identitysalient leads the low caste to expect prejudicial treatment. In this view, the resultsunder Random Winner arise because the randomization process signals that theexperimenter will not treat low-caste participants unfairly. One weakness of thisexplanation is that Random Winner does not eliminate the scope for discretionin evaluating performance: the subjects do not watch the grading of the mazes, andthey do not watch the experimenter pull a name out of the jar at the end of the

Figure 2. Cumulative proportion of low caste in each decile inRound 2–Round 1 scores


455

experiment and then reward that person.

17

Our second experiment uses a newexperimental design that reduces this ambiguity by making the link betweenperformance and rewards mechanical in some treatments, but not in others.

5. Experiment 2

5.1 Experimental design

A year later (March 2004) at the same site, we conducted a new experimentthat manipulates the scope for discretion in rewarding performance. In the exper-iment, players practice a task and then are offered the choice to accept or refuse agamble that they will succeed at the task. The scope for discretion in evaluatingsuccess varies across three experimental conditions, called gambles A, B, andC. In gamble A, the task is to solve a puzzle and there is no scope for judgment ordiscretion in the assignment of rewards: success mechanically triggers its ownreward. In gamble B, the task is again to solve the puzzle, but now there is scopefor judgment according to objective criteria. In gamble C, the task is to make‘a beautiful pattern’ and so the criteria for success are subjective. We describe eachgamble below.

Gamble A: No scope for discretion.

The task is to solve a puzzle based on the gameRush Hour Traffic Jam

.

A player physically gains possession of the success payoffby freeing his car from a traffic jam. To do this, he needs to move other vehicleson the 12-inch square wooden board backwards or forwards along a grid in orderto create a path for his car to the exit. The board is constructed in such a way thatonly the player’s car can get free of the board. A 20 rupee note (about 45 US cents)is visible through the dashboard of the player’s car. A player who solves the puzzleobtains his success payoff by taking it from the underside of the car. A player whodoes not solve the puzzle is given 1 rupee by the experimenter.

Gamble B: Scope for discretion – objective criteria.

This gamble is the same as gambleA except that the game board no longer has a frame. Without the frame, nothingprevents the player from sliding vehicles off the tracks and thus trivially solvingthe puzzle. The experimenter states,

All around the roads are wheat fields. To solve the puzzle, you have to free the red car[the player’s car] from the jam by moving cars in such a way that no car comes off theroad. Otherwise the fields will be damaged . . . The person in the room who will giveyou the puzzle will watch you. If he thinks you have solved the puzzle the right way,

17

As is usual in experiments, a player’s earnings are private information; the experimenter drew a nameout of the jar in private at the end of the experimental session.

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Hoff and Pandey

he will give you 20 rupees. If he thinks you have not solved the puzzle the right way,he will give you 1 rupee.

Gamble C: Scope for discretion – subjective criteria.

The task is to make ‘a beautifulpattern’ by gluing squares of colored paper onto a blank sheet of white paper. Weprovided four examples of ‘beautiful patterns,’ which were simple geometricpatterns that other players had made in the pilot experiment. Participants are toldthat they cannot copy those patterns, but have to make their own patterns.

Sixty individuals, 30 low-caste and 30 high-caste, participated in each treatment(three gambles, each under three conditions of caste salience), for a total of 540subjects. To recruit the subjects, we used a procedure designed to ensure thatsubjects did not know each other. Every day over a period of 11 days our teamwent to 6 randomly selected villages within a 20 kilometre radius of the site of ourexperiment. From every village, we drew high-caste and low-caste children fromthe public junior high school that served that village and the neighbouring villages.The strategy we followed to recruit subjects was to ask the teacher of the villagepublic school for the school register, which usually had names of children listedalphabetically.

18

With the teacher’s help, going down the list we chose the numberof high- and low-caste children needed from the village for our trials on that day.

On each day of the experiment, we recruited subjects from a different set ofvillages. We formed the six-person groups by taking one subject from each of thesix randomly selected villages. Thus on a given day, subjects in an experimentalsession came from six different villages and did not know each other. If a treatmentwas conducted over more than one day, we check that our results are not drivenby differences in the pool of villages across days.

19

Our team consisted of high-caste as well as low-caste men and women, all fromUttar Pradesh. One of the authors (Pandey) conducted that portion of every sessionin which the task was explained and the participants made their decision to acceptor refuse the gamble. These decisions are the data gathered from the experiment.

At the beginning of a session, each participant received a participation fee of10 rupees to bring home the idea that the game involved money. In gamble A, part-icipants obtained their fee by solving a practice puzzle. By solving the puzzle, aplayer freed his car from the traffic jam and could take a 10 rupee note from theunderside of the car. If he could not solve the practice puzzle in the eight-minutepractice period, the experimenter handed him a 10 rupee note. In Gambles B andC, the experimenter handed each player the participation fee.

18

We had a letter from the District Magistrate that instructed the teachers to cooperate with our team.

19

For each of the nine treatments, if the treatment lasted more than a day, we do a test of proportions totest for differences across days in the fraction of subjects refusing the gamble in that treatment. The resultsare not driven by such differences.


457

The experimenter showed the subjects how to do the task and gave them timeto practice: eight minutes to practice solving a puzzle that each child found at hisplace on the mat on the classroom floor, and five minutes to practice gluingsquares onto a plain sheet of paper. (The instructions are in the Appendix.) Afterthe practice period, she told participants that she would ask them to make a choice.They could choose the gamble (with a success payoff of 20 rupees and a failurepayoff of one rupee) or they could ‘opt out’ and receive 10 rupees. To check theplayers’ understanding, she asked each player a question about the reward systemusing a hypothetical example of accepting the gamble and winning, accepting itand losing, or rejecting it. She did not proceed until he had answered a questioncorrectly. Then the six subjects formed a line, were reminded not to speak amongthemselves, and entered a separate area one-by-one where they privately conveyedto the experimenter their decision to accept or reject the gamble. A subject whoaccepted the gamble was escorted to a room where he played the Traffic Jam gameor made the design under supervision of hired staff. The period in which theinstructions were explained and the child made his decision to accept or rejectthe gamble, lasted from 20–25 minutes for gambles A and B, and 12–18 minutesfor gamble C.

Before participating in the experiment, all subjects stayed in a separate class-room where a monitor entertained them. A subject’s movements after he conveyedhis decision would reveal to the other children in a session his choice, but thesubjects did not know that at the time they made their decision. The revelation oftheir decision does not affect our experimental data (players’ decision to acceptor refuse the gamble).

20

We summarize the time line as follows.First, six buses carrying children and one to two team members arrive, one by

one, at the experiment site. The children are coded, and enter the ‘in-classroom’where they wait until called to participate. When a child’s group is called, he andthe five others in his group go to the experimenter’s classroom next door. Theexperimenter goes through the instructions. The experimenter then asks the chil-dren to form a line and not to talk to each other. Each child in turn goes to a privatearea and indicates his choice to the experimenter. Depending on his choice, thechild is then escorted to one of two areas (the room in which to play the gamble,or the post-play interview room), although ultimately every child is escorted tothe post-play interview room. The child waits in the ‘out-classroom’ till the bus isready to take him home.

Given payoffs of 20 rupees for success, 1 rupee for failure, and 10 rupees for‘opting out,’ the gamble is a more-than-fair bet if a player’s probability of successis above 47 percent. In gamble A, most players were able to solve their practicepuzzle within the eight-minute practice session, so that it is plausible that they

20

It was not practical, given the number of rooms that we had available at the site of the experiment, tofully control the conditions under which subjects performed the tasks in gambles A through C. Only theconditions prior to an individual making his decision were fully controlled.

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Hoff and Pandey

perceived the gamble to solve a similar puzzle within five minutes as a more-than-fair bet. The puzzles in gamble B were the same as in gamble A. In gambleC, subjects did not know the probability of success because the criteria weresubjective.

21

But players could and did make judgments about the probability ofsuccess based on the examples we showed of four ‘beautiful patterns.’ We triedout alternative designs in the pilot and found that when the patterns were moresophisticated, the acceptance rate of the gamble fell sharply. The patterns we ulti-mately chose as prototypes in the experiment were quite simple, though attractive,and had been made by subjects in the pilot.

In gamble A, success triggers its own reward. In this gamble, making casteidentity salient can affect the refusal rate only by affecting an individual’s expec-tation of how well he will perform, or how much he will like performing the task thatthe gamble entails. In contrast, in gambles B and C, there is scope for discretionin rewarding success. Therefore increasing the salience of caste can affect the refusalrate by affecting how his performance will be judged.

5.2 Results

Table 2 reports all results. All

p

-values are bared on the parametric two-sample testof difference in proportions unless otherwise noted. We consider each gamble inturn.

Gamble A.

In gamble A, in which success mechanically triggers its own reward,low- and high-caste refusal rates do not significantly differ, regardless of thesalience of caste (see Figure 3, left panel). The

p

-values based on the

z-statistic are0.74, 0.16 and 0.64, respectively, in the control condition, Caste Announced, andSegregated. The similarity in the refusal rate by low and high castes is perhaps sur-prising in light of the caste differences in educational achievement and wealth.22

Compared to Caste Announced, in the Segregated treatment the refusal rate byboth caste groups actually falls, although not significantly. Even if the low-castesubjects have internalized the idea that success is reserved for the high caste, theself-confidence gained from solving the practice puzzle may ‘immunize’ themagainst experiencing a loss of self-confidence when their social identity is made

21 We chose, as a benchmark to guide our evaluation, to provide those who accepted gamble C a successpayoff 80 percent of the time. But we did not give information to participants on this, and they did notreceive their payoffs till just before we drove them back to their villages.22 In a very simple literacy test that we administered to each child in post-play interviews, 34 percent of thelow caste obtained a score of zero out of a possible five, compared to 20 percent for the high caste. In thenumeracy test, the fraction of children who obtained a zero out of a possible four was 38 percent amongthe low caste, and 21 percent among the high caste. We do not have landownership figures for the householdsof subjects in Experiment 2, but we do have such data for a subsample of households in Experiment 1.Among the sample of children going to public school, we find that mean household land wealth in acres is1.04 (standard deviation 1.1) for the low caste, and 2.47 (standard deviation 2.38) for the high caste.

How Belief Systems and Mistrust Shape Responses To Economic Incentives 459

salient, as research with ability-stereotyped groups would suggest (Steele, 1997).Put another way, because they have practiced the puzzles, the subjects may havevery little uncertainty about how they would perform in the gamble.

Gamble B. In gamble B, the demonstration and practice puzzles are the same as ingamble A, but the frame of the game board is removed. To be counted as success-fully solving the puzzle, a player must exercise care, as he tries out possible solu-tions, that no vehicle other than the player’s car crosses the edge of the board. Hecan easily achieve this if he places his hand at the side of the board when he movesa vehicle near that side, but a player might not think of doing that. Removing theframe from the game board does three things: it makes the game a bit more diffi-cult, it introduces ambiguity since a player might not know if he had committed aviolation or not, and it introduces a role for discretion by an evaluator who mustjudge whether or not a vehicle has crossed the edge of the board.

The right panel in Figure 3 reports results for gamble B. Consider first the casewhen no identity is salient. The refusal rate in gamble B is significantly greater than

Table 2. Proportion, by caste, that refuses the gamble as a function of whether and how social identity is made salient

No identity salient Caste announced Caste segregated and announced

Gamble ALow caste 0.20 0.23 0.10High caste 0.17 0.10 0.07

Test for differences between castesParametric test p = 0.74 p = 0.16 p = 0.64Mann–Whitney test p = 0.74 p = 0.17 p = 0.64

Gamble BLow caste 0.57 0.43 0.67High caste 0.40 0.40 0.30


Gamble CLow caste 0.37 0.47 0.50High caste 0.23 0.53 0.23


460 Hoff and Pandey

in gamble A (p-values are 0.003 for the low caste and 0.04 for the high caste).23 Butthere is no significant caste gap (p-value = 0.20), just as there was not in gamble A.This suggests that it is the increase in the difficulty of the game, and perhaps alsoaversion to ambiguity, that increase the refusal rate in gamble B compared with A,while the change in the performance requirements of the game affects low and highcastes in a similar way.

Consider next the results under the segregated condition. The low caste nowrefuses the gamble at more than twice the rate of the high caste. Moving fromgamble A to B raises the refusal rate by the low caste from 10 to 67 percent, andby the high caste, from 7 to 30 percent. The p-value of the refusal proportion of thelow caste compared to the high caste is 0.004.24 The solid line in the figure repre-sents a statistically significant treatment effect as measured by the p-value.

If the explanation for the increase in the refusal rate by the low caste is thatthey have internalized the stereotype that being successful is for the high caste,then increasing the scope for discretion in the evaluation of performanceshould not affect the refusal rate. However, if the expectation of prejudicialtreatment causes the change in the refusal rate, then increasing the scope fordiscretion should widen the caste gap, which is consistent with what we observe.We do a caste-wise test of difference in differences in the refusal rate betweengambles A and B across two experimental conditions – no identity salient versussegregated. Table 3 and Figures 4 and 5 show the results. For the low caste,

23 Based on the Mann–Whitney test, the p-values are 0.004 and 0.05 for the low and high castes, respectively.24 The corresponding p-value based on the Mann–Whitney test is 0.005.

Figure 3. Proportion, by caste, that refuses gambles A and B as a function of whether and how social identity is made salient


the effect of making caste salient is to raise the difference in the refusal rate ingamble B compared to A; for the high caste, making caste salient has no effect(one-sided p-values of 0.09 and 0.50, respectively, for low and high castes).25 Theseresults provide some support for the conclusion that the differential caste

25 The high p-value of 0.09 for the low caste likely results from a small sample size when testing fordifference in differences in proportions. For the high caste, the high p-value of 0.50 results from the differencein differences in proportions being exactly zero, i.e, the numerator in the t-statistic being zero.

Table 3. Difference in Differences in the proportion refusing the gamble Gamble B vs. Gamble A

Gamble B – Gamble A


No identity salient

Low caste 0.57 (= 0.67 − 0.10) 0.37 (= 0.57 − 0.20)Difference in differences in proportions 0.20(column 1 − column 2) One-sided p-value = 0.09

High caste 0.23 (= 0.30 − 0.07) 0.23 (= 0.40 − 0.17)Difference in differences in proportions 0.00(column 1 − column 2) One-sided p-value = 0.50

Figure 4. Difference in Differences in the proportion refusing the gamble Low-caste subjects

462 Hoff and Pandey

behaviour (when caste is made salient and there is a scope for discretion) is notdriven by differences across castes in ambiguity aversion, since such differences aredifferenced out in this test, but rather by the low caste’s expectation of prejudicialtreatment.

In the Caste Announced condition, the experimenter has signaled less concernwith caste than in the Segregated condition. Under this condition, the caste gap inthe refusal rate in gamble B is not significant (p-value = 0.79 ).26

To recapitulate the results, when the link between performance and payoffsis mechanical, making caste salient does not significantly affect the refusal rate.Instead, it is in the case where there is scope for discretion by a judge of performancethat making caste salient creates a caste gap.

Gamble C. In gamble C, there is scope for discretion in the evaluation of perform-ance and the success criteria – ‘a beautiful design’ – are subjective. Table 2 andFigure 6 present the results. A significant caste gap emerges only in the segregatedcondition (p-value = 0.03).27

26 The p-value based on the Mann–Whitney test is identical to that based on a two-sample test of proportions.27 We checked for robustness of the caste gap within each type of gamble controlling for parents’ educationand occupation (we do not have data on land owned by a child’s family). But since the left-hand sidevariable and all the right-hand side variables including caste are dummy variables in these regressions,there is relatively little variation in the occupation and education variables once caste is controlled for, giventhe small sample size. This tends to make the standard errors high in the regressions and also the p-values.

Figure 5. Difference in differences in the proportion refusing the gamble High-caste subjects


Compared to gamble A, both the low and high castes are more likely to rejectgamble C. This may be because subjects view success as unlikely and/or becausethey feel uncertain about their likelihood of success and are averse to ambiguity.Table 4 gives the p-values for the difference in differences in the refusal ratebetween gambles C and A across two experimental conditions (Segregated versusNo Identity Salient). For the low caste, the effect of making caste salient on thedifference in refusal rate between gambles A and C is significant (one-sidedp-value = 0.08). For the high caste, this difference in differences is insignificant(one-sided p-value = 0.24). These results, and their interpretation, mirror the resultsdiscussed above for the difference in differences test of gambles A and B.

Figure 6. Proportion, by caste, that refuses gamble C as a function of whether and how social identity is made salient

Table 4. Difference in differences in the proportion refusing the gamble Gamble C vs. Gamble A

Gamble C – Gamble A


No identity salient

Low caste 0.40 (= 0.50 − 0.10) 0.17 (= 0.37 − 0.20)Difference in differences in proportions 0.23(column 1 − column 2) One-sided p-value = 0.08

High caste 0.16 (= 0.23 − 0.07) 0.06 (= 0.23 − 0.17)Difference in differences in proportions 0.10(column 1 − column 2) One-sided p-value = 0.24

464 Hoff and Pandey

6. Discussion

The main finding of Experiment 1 is that making caste identity salient produces alarge and robust decline (controlling for parents’ land, occupation, and education)in the performance of the low caste, both absolutely and relative to the highcaste’s performance. To examine the possible role of mistrust, we manipulatethe scope for discretion in rewarding performance in Experiment 2. In this experi-ment, we investigate whether making caste salient has a larger effect on thewillingness to take a gamble when there is scope for discretion in rewardingperformance than when there is not. By analogy with Figure 1, Figure 7 summa-rizes the results on the caste gap. When there is no scope for discretion (gamble A),there are no significant differences between castes in the proportion that refusesthe gamble, and making caste identity salient has no significant effects.28 Instead,it is in the case where there is scope for discretion that making caste salient (bysegregating and announcing caste) discourages the low caste from accepting

28 In gamble A, the p-values for the difference in refusal rates across experimental conditions (no identitysalient versus caste announced, no identity salient versus segregated, and caste announced versus segregated)are 0.75, 0.28 and 0.16 respectively for the low caste. For the high caste, the corresponding values are 0.45,0.23 and 0.64.

Figure 7. Caste gap in refusing the gamble

Note : p-values are based on the z-statistic for a two-sample test of difference in proportions that assumesnormality. The null hypothesis is that that the proportions of subjects refusing the gamble are equal for thelow castes and high castes in the population. Because our sample sizes are small, we also report in Table 2the corresponding p-values based on the Mann–Whitney test.


the gamble (gamble B), and creates a large and significant caste gap (gambles Band C).29

There are several possible explanations for these results. All individuals of lowcaste would have experienced discrimination. Finding themselves in a single castegroup might remind them that members of higher castes are unwilling to live intheir neighbourhood or to mingle with them in their day-to-day activities, and thatthe reason for that is that their caste is held in disrepute. In a survey conductednear the site of the experiment, we found that children as young as seven areacutely aware of caste – their own and those of their friends. Play groups aresegregated: when asked who their friends are, 75 percent of low-caste childrenreport only low-caste friends and only 6 percent report any high-caste friends,while 87 percent of high-caste children report only high-caste friends andonly 3 percent report any low-caste friends (Hoff, Pandey and das Gupta, 2005).Responses to the household survey also indicate that caste inequality is ritualizedin the way adults interact: 56 percent of low-caste men report that they sit on theground or remain standing when visiting a high-caste household. Thus, it wouldbe natural for low-caste children that activation of their social identity would leadthem to expect discrimination in the gamble. There might be an additional influ-ence on behaviour from a difference between the way low-caste and high-castechildren expect their actions to be perceived. As discussed above, basic researchstrongly supports the idea that stereotypes bias perception in a self-confirmatoryway.

Self-doubt (rather than doubt about the fairness of others) may also play arole in our results. A byproduct of the way we introduced scope for discretion inrewarding performance in the puzzle game (by removing the gameboard framein gamble A) is to increase the difficulty of the task and, thus, the potential rolethat self-doubt might play when caste identity is primed. However, research onstereotype threat finds that very mild forms of social identity priming generallyinduce a change in performance in the direction predicted by the stereotype,30 andyet in our experiment the announcement of caste does not induce any significantchange in the refusal rate. This suggests that self-doubt triggered by priming casteis not the central factor driving our results. If it were, then one would expectthe announcement of caste to make the low caste anticipate performing worse orenjoying the gamble less, which would increase the rate of refusal in all gambles,but especially in B and C where the task is either more difficult or the criteria of

29 The treatment effect within caste is significant at the 7 percent level for the low caste in gamble B, but isnot statistically significant in gamble C. In gamble B, the p-values for the difference in refusal rates acrossexperimental conditions (no identity salient versus caste announced, no identity salient versus segregated,and caste announced versus segregated) are 0.30, 0.42 and 0.07 respectively for the low caste. For the highcaste, the corresponding values are 1.00, 0.42 and 0.42, respectively. For gamble C, the correspondingp-values are 0.43, 0.30, 0.80 for the low caste and 0.02, 1.00, 0.02 for the high caste.30 A survey is Steele, Spencer, and Aronson (2002). A classic experiment is summarized in footnote 3.

466 Hoff and Pandey

success more ambiguous. But we do not see a significant treatment effect of theannouncement of caste in any gamble.

It has been suggested to us that the effect of priming caste is mediated onlyby subjects’ experience of past discrimination, and not by the belief system itself.We believe, however, that two factors point to a direct effect of a shared symbolicsystem.

First, the fact that a low-caste individual has experienced discrimination andhas observed that others have, too, might not cause him to expect that he wouldbe discriminated against because of his caste. Experience is not, in general, sufficientto create social categories and judgments associated with stereotypes (see thereview in Hamilton and Sherman, 1994, p. 23). Many researchers have concluded thatto explain the experimental findings on stereotypes, one requires some pre-formedabstractions – in our case, caste categories.

Caste has been called ‘a marker of difference . . . [that] harbor[s] the ideologiesof pollution and exclusion’ (Dirks, 2001, p. 130). A child does not, of course, needto know that in Hindu ideology, ‘untouchable substances’ of which the low castesare held to be made are the justification for the barriers to opportunity and thehumiliations imposed on them. But in light of their experience of segregation andtheir own personal experience and observations of discrimination based on theircaste membership, it is easy to understand how activating caste identity remindslow-caste subjects of the stigma of their social identity and the exclusion (from dueprocess, equal standing, and so on) to which the stigma gives rise.31 In that view,the widely understood social meaning of caste plays an independent role in trig-gering the expectation that one’s efforts will not be fairly judged and rewarded.

The second factor relates to the effect of segregation in Experiment 2. We foundthat a significant treatment effect of priming caste identity arises only when twoconditions hold simultaneously: there is scope for bias and the segregated condi-tion holds. A plausible explanation is that segregation is a signal to low-casteparticipants that the experimenter is particularly concerned with the caste hierar-chy, which traditionally excludes mixing of low and high castes, and therefore isparticularly likely to use his discretion in rewarding performance in a biased way.Segregation can play this signalling role only because of the shared symbolicsystem of caste.

7. Conclusion

The thesis explored in this paper is that regimes that historically blocked opportu-nities for mobility to broad social groups have a cultural component, that changes

31 A forceful argument that stigma (a ‘spoiled collective identity’) is an ideological legacy of the history ofracial relations in the US and that it contributes to the persistence of racial inequality independently of anyacts of discrimination can be found in Loury (2002).


in culture may lag behind changes in law, and that, by shaping expectations,culture may contribute to the persistence of group inequality. Opportunity is noteverything: the cultural legacy of a history of vast inequality in political power andwealth may contribute to the ability of a society to maintain a social group in asubordinate position to a degree out of proportion to the elite’s actual, contemporarypolitical power and wealth.

An aspect of this cultural legacy that plays only a limited role in our experimentbut plays a crucial role in strategic interactions is that the cultural legacy iscommon knowledge. Not only do we as experimenters learn from our results that thelow caste may have shared expectations of prejudicial treatment in social contextswhere caste is salient; undoubtedly everyone living in the society has learned thattoo from direct observation.32 That has implications for submission to authority.A low-caste individual is more likely to submit to the authority of the high caste ifhe believes that others will do so, too. A high-caste person is more likely to exercisethat authority, the higher his expectation that the low caste will submit. A sharedsymbolic system stabilizes and coordinates expectations.33 The cultural legacy ofpast inequality may thus be helpful for understanding not only why the subordinategroup’s response to a given structure of opportunities is muted, but also how unequalstructures of opportunity can be reproduced over time.

References

Ambady, N., Shih, M., Kim, A. and Pittinsky, T. L. (2001). ‘Stereotype susceptibility inchildren: Effects of identity activation on quantitative performance’, Psychological Science,12, pp. 385–90.

Arrow, K. J. (1998). ‘What has economics to say about racial discrimination?’ Journal ofEconomic Perspectives, 12(2), pp. 91–100.

Benton, L. (2002). Law and Colonial Cultures: Legal Regimes in World History, 1400–1900,Cambridge, UK: Cambridge University Press.

Blair, I. V., Judd, C. M. and Chapleau, K. M. (2004). ‘The influence of Afrocentric facialfeatures in criminal sentencing’, Psychological Science, 15(10), pp. 674–79.

Chwe, M. S-Y. (2001). Rational Ritual: Culture, Coordination, and Common Knowledge, Princeton,NJ: Princeton University Press.

Cohen, G. L. and Steele, C. M. (2002). ‘A barrier of mistrust: How negative stereotypes affectcross-race mentoring’, in Aronson, J. (ed.), Improving Academic Achievement, Amsterdam:Elsevier Science Publishers.

32 Note that the similarity in the performance of the low- and high-caste groups does not reflect sharedpersonal experiences across subjects. Within a session, no participant knew any other participant (asreported in individual, post-play interviews), and within the treatments of gamble B, segregated, and ofgamble C, segregated, individuals were drawn from a total of at least 12 villages.33 These ideas are developed in Chwe (2001), who emphasizes that a shared symbolic system is a realresource because it generates common knowledge.

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Deshpande, A. ( 2002). ‘Does caste still define disparity? A look at inequality in Kerala,India’, American Economic Review, 20(2), pp. 322–25.

Dirks, N. B. (2001). Castes of Mind: Colonialism and the Making of Modern India, Princeton, NJ:Princeton University Press.

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Hamilton, D. L. and Sherman, J. W. (1994). ‘Stereotypes’, in Wyer, R. S. Jr. and Srull, T. K.(eds.), Handbook of Social Cognition, 2nd Ed., Vol. 2, Hillsdale, NJ: Lawrence ErlbaumAssociates, pp. 1–68.

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Harbaugh, W. T., Krause, K. and Berry, T. R. (2001). ‘GARP for kids: On the developmentof rational choice behavior’, American Economic Review, 91, pp. 1539–45.

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Hoff, K., Pandey, P. and das Gupta, M. (2005). ‘Institutional inertia in a highly unequalsociety. Evidence from a North Indian village with political reservations’, forthcomingin Journal of Development Economics.

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Appendix

Instructions translated from HindiThe setting is a classroom with places on a floor mat set for six children. At eachplace is a piece of fruit and supplies. The supplies are a game board with frame (forgamble A), a game board without frame (for gamble B), and paper and glue (forgamble C).

Gamble A1. You are about to participate in a game with puzzles. You cannot talk to

each other during the game; otherwise you will not get the reward.2. First I will show you how to solve a puzzle. There are several cars in a

traffic jam. To solve the puzzle, you have to free the red car from thejam by moving cars around. You can neither lift a car nor turn a car. Youcan only move a car backward or forward. You move cars around in orderto free the way for the red car to exit.

3. Experimenter shows on the board how to solve a puzzle. This is the red car andthis is the exit. The red car has to come out of the exit. If you find a waythat the red car can exit, then you will be able to take the money out ofthe bottom of the car. The money is your prize for solving the puzzle. Themoney is yours to keep. Experimenter moves cars around so that the red carcomes out of the exit. Experimenter shows how to take out the prize money fromthe bottom of the red car.

4. Now each of you will practice solving one puzzle. You will have 8 minutesto do so. For participating in today’s event, each of you will receive Rs. 10.You can see this money inside the red car. You can take it out after youfind a path to the exit for the red car.

5. The experimenter allows time for the children to practice and take Rs. 10 out of the redcar. If a participant cannot solve the practice puzzle in 8 minutes, the experimenterhands him Rs. 10 at the end of 8 minutes. Then the experimenter shows how tosolve a second (but different) puzzle of the same type.

6. Now you can choose between playing the game, i.e., solving a puzzle, oropting out. After I explain to you the reward rule, I will ask each of you inprivate about your choice.

7. If you choose to opt out, I will send you to a room where you will receiveRs. 10 in an envelope.

8. If you choose to solve the puzzle, I will send you to a different room whereyou will have 5 minutes to do a different puzzle of the same type. If youare able to solve the puzzle, you will receive Rs. 20. This money will be inthe red car as before, and you can take it out once you have freed the redcar from t traffic jam. If you are not able to solve the puzzle, you willreceive Rupee 1 in that room.

470 Hoff and Pandey

9. I will ask each of you in private about your choice and direct you to aroom. But first I want to check that you understand. Experimenter shows anexample on the blackboard and asks each child, in turn, to answer a question.a. Ram chooses to do the puzzle. He solves the puzzle. How much

money does he receive?b. Syam chooses to do the puzzle. He does not solve it. How much

money does he receive?c. Mohan chooses not to do the puzzle. How much money does he

receive?d. Ram chooses to do the puzzle. He does not solve it. How much money

does he receive?e. Syam chooses not to do the puzzle. How much money does he receive?f. Mohan chooses to do the puzzle. He solves it. How much money does

he receive?Experimenter does not go on until each child has answered one question correctly.

10. Please come to me one-by-one to tell me privately the choice you havemade. Experimenter directs each child to the appropriate room. Children who optout go to a particular room and receive Rs. 10. Participants who choose to play aredirected to another room where they play the game – two participants play at atime.

Gamble B1. You are about to participate in a game with puzzles. You cannot talk to

each other during the game; otherwise you will not get the reward. Each ofyou will receive Rs. 10 to participate in this game. Experimenter gives eachparticipant Rs. 10.

2. First I will show you how to solve a puzzle. There are several cars in atraffic jam on the roads. All around the roads are wheat fields. To solve thepuzzle, you have to free the red car from the traffic jam by moving cars insuch a way that no car comes off the road. Otherwise the fields will bedamaged. The red car has to come out of the road at the place marked withthe red strip. You can neither lift a car nor turn a car; you can only move a carbackward or forward. You need to move cars around without damagingthe fields in order to clear a path for the red car to exit on the road with thered strip. The car has to cross the red strip to come out.

3. Experimenter shows how to solve a puzzle on the board: This is the red car andthis is the exit with the red strip. The red car has to exit at the red strip.Experimenter moves the cars around without damaging the fields such that the redcar exits.

4. Now each of you will practice solving one puzzle. You will have 8 minutesto do so.

5. After each participant has practiced, experimenter shows how to solve a second(but different) puzzle of the same type.


6. Now you can choose between playing the game, i.e., solving the puzzle, oropting out. After I explain to you the reward rule, I will ask each of you inprivate about your choice.

7. If you choose to opt out, I will hand you Rs. 10 in an envelope.8. If you choose to solve a puzzle, I will send you to another room where

there is a person who will give you a different puzzle of the same type.Only one participant will play in that room at one time. You will have 5minutes to solve the puzzle, that is, to take the red car out of the road withthe red strip without damaging the fields. The person in the room whowill give you the puzzle will watch you during that time. If he thinks youhave solved the puzzle the right way, he will give you Rs. 20. If he thinksyou have not solved the puzzle the right way, he will give you Rupee 1.

9. I will ask each of you in private about your choice and direct you to aroom. But first I want to check that you understand. Experimenter shows anexample on the board, and asks each child in turn to answer a question.a. Ram chooses to do the puzzle. The person in the room who gives him

the puzzle to do thinks that Ram solved it the right way. How muchmoney does he receive?

b. Syam chooses to do the puzzle. The person in the room who gives himthe puzzle to do thinks that Syam did not solve it the right way. Howmuch money does he receive?

c. Mohan chooses not to do the puzzle. How much money does he receive?d. Ram chooses to do the puzzle. The person in the room who gives him

the puzzle to do thinks that Syam did not solve it the right way. Howmuch money does he receive?

e. Syam chooses not to do the puzzle. How much money does he receive?f. Mohan chooses to do the puzzle. The person in the room who gives

him the puzzle to do thinks that Ram solved it the right way. Howmuch money does he receive? Experimenter does not go on until each child has answered one questioncorrectly.

10. Please come to me one-by-one to tell me privately the choice you havemade. Participants who opt out receive Rs. 10 in an envelope from the experi-menter. Participants who choose to play are directed to a room where they play thegame individually.

Gamble C1. You are about to participate in a game of making patterns. You cannot talk

to each other during the game; otherwise you will not get the reward. Eachof you will receive Rs. 10 to participate in this game. Experimenter gives eachparticipant Rs. 10.

2. Do you know what a design or a pattern is – like the design or pattern onthe sari that your mother wears or the design or pattern on the baithaka

472 Hoff and Pandey

[sitting rug]. Here we will make a pattern by sticking pieces of colouredpaper on a sheet of paper. These are examples of patterns made by villageparticipants in grades 6 and 7, just like you. Experimenter points to the fourpatterns posted on the wall in front of the participants. Each of these is abeautiful pattern.

3. Now I will show you how to stick pieces of coloured paper on the whitesheet of paper. Experimenter shows how to use glue to stick two pieces of paperonto a white paper sheet. This is glue and here are pieces of colored paper.This is how you glue a piece of colored paper.

4. Now each of you will practice sticking two pieces of paper onto a whitesheet of paper. Experimenter gives each participant two pieces of colored paper.

5. After each participant has practiced: Now you can choose between playingthe game, i.e., making a design, or pattern or opting out. After I explain thereward rule, I will ask each of you in private about your choice.

6. If you choose to opt out, I will send you to a room where you will receiveRs. 10 in an envelope.

7. If you choose to make a pattern or design, I will send you to a differentroom where you will have 5 minutes to make a pattern. You will be givenglue and several pieces of coloured paper. If you make a beautiful design,you will receive Rs. 20. If your design is not beautiful, you will receiveRupee 1. Experimenter points to the four patterns posted on the wall in front ofthe participants. These are some examples of beautiful designs. But youcannot make one of these patterns since I have shown you these.

8. I will ask each of you in private about your choice and direct you to aroom. But first I want to check that you understand.Experimenter asks each child in turn to answer a question.a. Ram chooses to make a pattern. He makes a beautiful pattern. How

much money does he receive?b. Syam chooses to make a pattern. He does not make a beautiful pattern.

How much money does he receive?c. Mohan chooses not to make a pattern. How much money does he

receive?d. Ram chooses to make a pattern. He does not make a beautiful pattern.

How much money does he receive?e. Syam chooses not to make a pattern. How much money does he receive?f. Mohan chooses to make a pattern. He makes a beautiful pattern. How

much money does he receive? Experimenter does not go on until each child has answered one question correctly.

9. Please come to me one-by-one to tell me privately the choice you havemade. Experimenter directs each child to the appropriate room. Participantswho opt out go to a particular room and receive Rs. 10. Participants whochoose to play are directed to another room where they are asked to make apattern.