Hostname: page-component-7b9c58cd5d-9klzr Total loading time: 0 Render date: 2025-03-16T11:58:40.252Z Has data issue: false hasContentIssue false
  • English
  • Français

Inequality as a barrier to economic integration? An experiment

Published online by Cambridge University Press:  14 March 2025

Gabriele Camera Open the ORCID record for Gabriele Camera [Opens in a new window] ,
Lukas Hohl  and
Rolf Weder
Gabriele Camera*
Affiliation:
Economic Science Institute, Chapman University, One University Dr., Orange, CA 92866, USA
Lukas Hohl*
Affiliation:
Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, 4002 Basel, Switzerland
Rolf Weder*
Affiliation:
Faculty of Business and Economics, University of Basel, Peter Merian-Weg 6, 4002 Basel, Switzerland
*
camera@chapman.edu
lukas.hohl@unibas.ch
rolf.weder@unibas.ch
Get access Rights & Permissions [Opens in a new window]

Abstract

International economic theory suggests that people should embrace economic integration because it promises large gains. But policy reversals such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment of how size and cross-country distribution of gains from integration influence individuals’ inclination to cooperate to reap its intended benefits and to embrace or reject integration. The design considers an indefinitely repeated helping game with multiple equilibria and strategic uncertainty. The data reveal that inequality of potential gains neither affected behavior nor reduced support for economic integration. However, integration may lead to disappointing, unequally distributed welfare gains, undermining support for the policy. This suggests that to better assess integration policies, we should account for the spillover effects of integration on behavior. Miscalculating this behavioral aspect may undermine the intended development goals and motivate calls for dramatic policy-reversals.

Keywords

Economic opportunityEndogenous institutionsGlobalizationIndefinitely repeated gamesSocial dilemmas

JEL classification

F02: International Economic Order and Integration C90: General C70: General
Type
Original Paper
Information
Experimental Economics , Volume 26 , Issue 2 , April 2023 , pp. 383 - 411
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2022.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Supplementary Information The online version contains supplementary material available at https://doi.org/10.1007/s10683-022-09777-4.

The authors thank Editors L. Gangadharan and J. Duffy, two anonymous reviewers for many helpful comments, N. Schmitt, the ESI lab manager and seminar participants at: CSU Fullerton, Universities of Basel, Hamburg, Miami, USC, UC Santa Barbara, Canadian Economics Association 2019 meetings, World Bank ABCDE 2019 conference, 2019 GSE Summer Forum (Pompeu Fabra), 2019 SSES Conference (Geneva), 2018 and 2019 ESA meetings (Berlin, Los Angeles). The replication material for the study is available at https://doi.org/10.7910/DVN/FNRYHO. The authors acknowledge partial research support through the SNSF Grant No. 100018.172901.

References

Ahn, T., Isaac, M., & Salmon, T. (2009). Coming and going: Experiments on endogenous group sizes for excludable public goods. Journal of Public Economics, 93(1), 336–351. 10.1016/j.jpubeco.2008.06.007CrossRefGoogle Scholar
Antràs, P., & Costinot, A. (2010). Intermediation and Economic Integration. American Economic Review: Papers and Proceedings, 100, 424–428. 10.1257/aer.100.2.424CrossRefGoogle Scholar
Balafoutas, L., Kocher, M., Putterman, L., & Sutter, M. (2013). Equality, equity and incentives: An experiment. European Economic Review, 60, 35–51. 10.1016/j.euroecorev.2013.01.005CrossRefGoogle Scholar
Baland, J. M., Gangadharan, L., Maitra, P., & Somanathan, R. (2017). Repayment and exclusion in a microfinance experiment. Journal of Economic Behavior and Organization, 137, 176–190. 10.1016/j.jebo.2017.02.007CrossRefGoogle Scholar
Barrett, S., & Dannenberg, A. (2012). Climate negotiations under scientific uncertainty. Proceedings of the National Academy of Sciences, 109, 17372–17376. 10.1073/pnas.1208417109CrossRefGoogle ScholarPubMed
Bigoni, M., Camera, G., & Casari, M. (2019). Partners or strangers? Cooperation, monetary trade, and the choice of scale of interaction. American Economic Journal: Microeconomics, 11(2), 195–227.Google Scholar
Bigoni, M., Camera, G., & Casari, M. (2020). Cooperation among strangers with and without a monetary system. In Capra, C. M., Croson, R., Rigdon, M., & Rosenblat, T. (Eds.), Handbook of experimental game theory, Cheltenham, UK and Northampton, MA, USA (pp. 213–240) Edward Elgar Publishing.Google Scholar
Bolton, G. E., & Ockenfels, A. (2000). ERC: A theory of equity, reciprocity and competition. American Economic Review, 90, 166–193. 10.1257/aer.90.1.166CrossRefGoogle Scholar
Buckley, E., & Croson, R. (2006). Income and wealth heterogeneity in the voluntary provision of linear public goods. Journal of Public Economics, 90(4–5), 935–955. 10.1016/j.jpubeco.2005.06.002CrossRefGoogle Scholar
Camera, G., & Hohl, L. (2021). Group-identity and long-run cooperation: An experiment. Journal of Economic Behavior and Organization, 188, 903–915. 10.1016/j.jebo.2021.06.017CrossRefGoogle Scholar
Camera, G., Casari, M., & Bigoni, M. (2013). Money and trust among strangers. Proceedings of the National Academy of Sciences of the U.S., 110(37), 14889–14893. 10.1073/pnas.1301888110CrossRefGoogle ScholarPubMed
Camera, G., Casari, M., & Bigoni, M. (2013). Experimental markets with frictions. Journal of Economic Surveys, 27(3), 536–553. 10.1111/joes.12018CrossRefGoogle Scholar
Camera, G., Deck, C., & Porter, D. (2020). Do economic inequalities affect long-run cooperation and prosperity?. Experimental Economics, 23(1), 53–83. 10.1007/s10683-019-09610-5CrossRefGoogle Scholar
Camera, G., Goldberg, D., & Weiss, A. (2020). Endogenous market formation and monetary trade: An experiment. Journal of the European Economic Association, 18(3), 1553–1588. 10.1093/jeea/jvz020CrossRefGoogle Scholar
Cappelen, A. W., Eichele, T., Hugdahl, K., Specht, K., Sørensen, E., & Tungodden, B. (2014). Equity theory and fair inequality: A neuroeconomic study. Proceedings of the National Academy of Sciences of the U.S., 111(43), 15368–15372. 10.1073/pnas.1414602111CrossRefGoogle ScholarPubMed
Chakraborty, I., Hai, R., Holter, H. A., & Stepanchuk, S. (2017). The real effects of financial (Dis)integration: A multi-country equilibrium analysis of Europe. Journal of Monetary Economics, 85, 28–45. 10.1016/j.jmoneco.2016.11.003CrossRefGoogle Scholar
Chan, K. S., Mestelman, S., Moir, R., & Muller, R. A. (1999). Heterogeneity and the voluntary provision of public goods. Experimental Economics, 2(1), 5–30. 10.1023/A:1009984414401CrossRefGoogle Scholar
Cinyabuguma, M., Page, T., & Putterman, L. (2005). Cooperation under the threat of expulsion in a public goods experiment. Journal of Public Economics, 89(8), 1421–1435. 10.1016/j.jpubeco.2004.05.011CrossRefGoogle Scholar
Costinot, A., & Rodríguez-Clare, A. (2018). The US gains from trade: Valuation using the demand for foreign factor services. Journal of Economic Perspectives, 32(2), 3–24. 10.1257/jep.32.2.3CrossRefGoogle Scholar
Croson, R., Fatas, E., Neugebauer, T., & Morales, J. (2015). Excludability: A laboratory study on forced ranking in team production. Journal of Economic Behavior and Organization, 114, 13–26. 10.1016/j.jebo.2015.03.005CrossRefGoogle Scholar
Dal Bó, E., Dal Bó, P., & Eyster, E. (2018). The demand for bad policy when voters underappreciate equilibrium effects. The Review of Economic Studies, 85, 964–998. 10.1093/restud/rdx031CrossRefGoogle Scholar
Dannenberg, A., & Gallier, C. (2020). The choice of institutions to solve cooperation problems: A survey of experimental research. Experimental Economics, 23, 716–749. 10.1007/s10683-019-09629-8CrossRefGoogle Scholar
Dannenberg, A., Haita-Falah, C., & Zitzelsberger, S. (2019). Voting on the threat of exclusion in a public goods experiment. Experimental Economics, 23, 84–109. 10.1007/s10683-019-09609-yCrossRefGoogle Scholar
De Geest, L. R., & Kingsley, D. C. (2021). Norm enforcement with incomplete information. Journal of Economic Behavior and Organization, 189, 403–430. 10.1016/j.jebo.2021.05.035CrossRefGoogle Scholar
Dekel, S., Fischer, S., & Zultan, R. (2017). Punishment and reward institutions with harmed minorities. Journal of Public Economics, 146(c), 87–96. 10.1016/j.jpubeco.2016.12.007CrossRefGoogle Scholar
Desmet, K., Nagy, D. K., & Rossi-Hansberg, E. (2018). The geography of development. Journal of Political Economy, 126(3), 903–983. 10.1086/697084CrossRefGoogle Scholar
Feenstra, R. (2018). Alternative sources of the gains from international trade: Variety, creative destruction, and markups. Journal of Economic Perspectives, 32(2), 25–46. 10.1257/jep.32.2.25CrossRefGoogle Scholar
Fehr, E., & Schmidt, K. (1999). A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114, 817–868. 10.1162/003355399556151CrossRefGoogle Scholar
Fetzer, T. (2019). Did austerity cause Brexit?. American Economic Review, 109(11), 3849–3886. 10.1257/aer.20181164CrossRefGoogle Scholar
Fetzer, T., & Wang, S. (2020). Measuring the regional economic cost of Brexit: Evidence up to 2019. CAGE working paper no. 486.Google Scholar
Fischbacher, U. (2007). z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Fischbacher, U., Schudy, S., & Teyssier, S. (2014). Heterogeneous reactions to heterogeneity in returns from public goods. Social Choice and Welfare, 43, 195–217. 10.1007/s00355-013-0763-xCrossRefGoogle Scholar
Fort, T. C., Pierce, J. R., & Schott, P. K. (2018). New perspectives on the decline of US manufacturing employment. Journal of Economic Perspectives, 32(2), 47–72. 10.1257/jep.32.2.47CrossRefGoogle Scholar
Gallier, C., Kesternich, M., & Sturm, B. (2017). Voting for burden sharing rules in public goods games. Environmental and Resource Economics, 67, 535–557. 10.1007/s10640-016-0022-6CrossRefGoogle Scholar
Gangadharan, L., Nikiforakis, N., & Villeval, M. C. (2017). Normative conflict and the limit to self-governance in heterogeneous populations. European Economic Review, 100, 143–156. 10.1016/j.euroecorev.2017.07.013CrossRefGoogle Scholar
Gürerk, Ö, Irlenbusch, B., & Rockenbach, B. (2006). The competitive advantage of sanctioning institutions. Science, 312, 107–111. 10.1126/science.1123633CrossRefGoogle ScholarPubMed
Güth, W., Levati, V., Sutter, M., & Van der Heijden, E. (2007). Leading by example with and without exclusion power in voluntary contribution experiments. Journal of Public Economics, 91(5), 1023–1042. 10.1016/j.jpubeco.2006.10.007CrossRefGoogle Scholar
Hakobyan, S., & McLaren, J. (2016). Looking for local labor market effects of NAFTA. Review of Economics and Statistics, 98(4), 728–41 10.1162/REST_a_00587CrossRefGoogle Scholar
Hargreaves Heap, S. P., Ramalingam, A., & Stoddard, B. V. (2016). Endowment inequality in public goods games: A re-examination. Economics Letters, 146, 4–7. 10.1016/j.econlet.2016.07.015CrossRefGoogle Scholar
Haushofer, J., & Fehr, E. (2014). On the psychology of poverty. Science, 344(6186), 862–867. 10.1126/science.1232491CrossRefGoogle ScholarPubMed
Isaac, R. M., & Walker, J. M. (1988). Group size effects in public goods provision: The voluntary contributions mechanism. Quarterly Journal of Economics, 103, 179–199. 10.2307/1882648CrossRefGoogle Scholar
Isaac, R. M., & Walker, J. M. (1988). Communication and free-riding behavior: The voluntary contribution mechanism. Economic Inquiry, 26, 585–608. 10.1111/j.1465-7295.1988.tb01519.xCrossRefGoogle Scholar
Kandori, M. (1992). Social norms and community enforcement. Review of Economic Studies, 59(1), 63–80. 10.2307/2297925CrossRefGoogle Scholar
Kölle, F. (2015). Heterogeneity and cooperation: The role of capability and valuation on public goods provision. Journal of Economic Behavior and Organization, 109, 120–134. 10.1016/j.jebo.2014.11.009CrossRefGoogle ScholarPubMed
Maier-Rigaud, F. P., Martinsson, P., & Staffiero, G. (2010). Ostracism and the provision of a public good: Experimental evidence. Journal of Economic Behavior and Organization, 73(3), 387–395. 10.1016/j.jebo.2009.11.001CrossRefGoogle Scholar
Nash, J. F., Nagel, R., Ockenfels, A., & Selten, R. (2012). The agencies method for coalition formation in experimental games. Proceedings of the National Academy of Sciences, 109(50), 20358–20363. 10.1073/pnas.1216361109CrossRefGoogle ScholarPubMed
Nikiforakis, N., Noussair, C. N., & Wilkening, T. (2012). Normative conflict and feuds: The limits of self-enforcement. Journal of Public Economics, 96(9–10), 797–807. 10.1016/j.jpubeco.2012.05.014CrossRefGoogle Scholar
Noussair, C., Plott, C. R., & Riezman, R. G. (1995). An experimental investigation of the patterns of international trade. American Economic Review, 85(3), 462–491.Google Scholar
Ossa, R. (2015). Why trade matters after all?. Journal of International Economics, 97(2), 266–277. 10.1016/j.jinteco.2015.07.002CrossRefGoogle Scholar
Rabin, M. (1993). Incorporating fairness into game theory and economics. American Economic Review, 83, 1281–1302.Google Scholar
Reuben, E., & Riedl, A. (2013). Enforcement of contribution norms in public good games with heterogeneous populations. Games and Economic Behavior, 77, 122–137. 10.1016/j.geb.2012.10.001CrossRefGoogle Scholar
Rodrik, D. (2000). How far will international economic integration go?. Journal of Economic Perspectives, 14(1), 177–186. 10.1257/jep.14.1.177CrossRefGoogle Scholar
Rossi-Hansberg, E. Jones, R. W., & Weder, R. (2017). 200 Years of Ricardian theory: The missing dynamics. 200 Years of Ricardian trade theory, Cham: Springer 197–205. 10.1007/978-3-319-60606-4_17CrossRefGoogle Scholar
Reuben, E., & Riedl, A. (2009). Public goods provision and sanctioning in privileged groups. Journal of Conflict Resolution, 53, 72–93. 10.1177/0022002708322361CrossRefGoogle Scholar
Sadrieh, A., & Verbon, H. A. (2006). Inequality, cooperation, and growth: An experimental study. European Economic Review, 50, 1197–1222. 10.1016/j.euroecorev.2005.01.009CrossRefGoogle Scholar
Sampson, T. (2017). Brexit: The economics of international disintegration. Journal of Economic Perspectives, 31(4), 163–184. 10.1257/jep.31.4.163CrossRefGoogle Scholar
Stiglitz, J. E. (2020). Rewriting the rules of the European economy, W.W. Norton & Company.Google Scholar
Stolper, W. F., & Samuelson, P. A. (1941). Protection and real wages. The Review of Economic Studies, 9(1), 58–73. 10.2307/2967638CrossRefGoogle Scholar
Tavoni, A., Dannenberg, A., Kallis, G., & Löschel, A. (2011). Inequality, communication, and the avoidance of disastrous climate change in a public goods game. Proceedings of the National Academy of Sciences of the U.S., 108(29), 11825–11829. 10.1073/pnas.1102493108CrossRefGoogle Scholar
Zelmer, J. (2003). Linear public goods experiments: A meta-analysis. Experimental Economics, 6, 299–310. 10.1023/A:1026277420119CrossRefGoogle Scholar
Supplementary material: File

Camera et al. supplementary material

A Appendix
Download Camera et al. supplementary material(File)
File 1 MB
Supplementary material: File

Camera et al. supplementary material

B Supplementary Material (for online publication)
Download Camera et al. supplementary material(File)
File 63.4 KB