Sergio Lo Iacono (European University Institute)

“The effect of trusting and trustworthy environments on the provision of public goods”

Abstract: Trusting and trustworthy environments are argued to promote collective action, as people learn to rely on their fellow citizens and believe that only few individuals will free ride. However, no study has tested the causal validity of this mechanism. To do so, we propose an experimental design that allows us to create different trusting and trustworthy conditions simply by (1) manipulating the incentive structure of an iterated binary Trust Game and (2) allowing information to flow among participants. Subjects are randomly assigned to either a low or high trusting environment, play 20 rounds of a binary Trust Game, and then participate in a one-shot binary Public Goods game. Findings indicate that, given a similar distribution of resources among subjects, trusting and trustworthy environments strongly foster the provision of public goods. This outcome is largely driven by a learning effect: we are more likely to act for the collectivity when we learn from the community to be trustful or reliable in our one-to-one interactions. The same applies in the opposite direction: we are more prone to free ride when we learn from the environment to be distrustful or unreliable in our dyadic exchanges.