REPRESENTATIVE TRUST AND RECIPROCITY: PREVALENCE AND DETERMINANTS THOMAS DOHMEN, ARMIN FALK, DAVID HUFFMAN and UWE SUNDE* This paper provides evidence about the determinants of trust and reciprocal inclinations, that is, a tendency for people to respond in kind to hostile or kind actions, in a representative setting. We investigate the prevalence of reciprocity in the population, the correlation between trust and positive and negative reciprocal inclinations within person, the individual determinants of reciprocity, and the relationship with psychological measures of personality. We find that most people state reciprocal inclinations, in particular in terms of positive reciprocity, as well as substantial heterogeneity in the degree of trust and reciprocity. Trust and positive reciprocity are only weakly correlated, while trust and negative reciprocity exhibit a negative correlation. In terms of determinants, being female and increasing age are associated with stronger positive and weaker negative reciprocal tendencies. Taller people are more positively reciprocal, but height has no impact on negative reciprocity. Psychological traits also affect trust and reciprocity. (JEL D63, J3, J6) I. INTRODUCTION Numerous experiments show that in certain situations people are willing to trust, that is, make themselves vulnerable to exploitation by opportunistic individuals (for a survey, see Camerer 2003). Another large body of experimental evidence documents the ten- dency for people to be positively reciprocal, rewarding kind actions by others, or be nega- tively reciprocal, punishing others for unkind actions, even when these reciprocal actions are costly and contrary to own material self- interest (for a survey, see Fehr and Gachter�� 2002). There is little evidence, however, on the prevalence and determinants of these traits in the general population. Exploring these issues requires leaving the laboratory and using a large, representative survey that includes measures of trust, positive reciprocity, and negative reciprocity. In this paper, we pursue this line of research using data from a represen- tative survey of roughly 22,000 adults living in Germany. Information on trust and reciprocal tendencies is accompanied by extensive socio- economic information and also by psychomet- ric measures of an individual���s personality type (the so-called ������Big Five������). Our first set of results comes from a compar- ison of the distributions for trust, positively re- ciprocal inclinations, and negatively reciprocal inclinations. Our findings indicate substantial heterogeneity in trust, consistent with pre- vious survey evidence on trust (e.g., Alesina and Ferrara 2002 Bellemare and Kroger�� 2006). To our knowledge, ours is the first evi- dence from a large survey on the prevalence of negative and positive reciprocity. The prevalence *We thank the German Science Foundation for finan- cial support through SPP1169 (Potential for more Flexi- bility on Heterogeneous Labor Markets). Dohmen: Senior Research Associate, Institute for the Study of Labor (IZA), P.O. Box 7240, D-53072 Bonn, Germany. Phone 49-228-3894-112, Fax 49-228-3894- 180, E-mail dohmen@iza.org Falk: Professor, University of Bonn and IZA, Adenauerallee 24-42, D-53113 Bonn, Germany. Phone 49-228-735082, Fax 49-228-739239, E-mail armin.falk@uni-bonn.de Huffman: Senior Research Associate, Institute for the Study of Labor (IZA), P.O. Box 7240, D-53072 Bonn, Ger- many. Phone 49-228-3894-522, Fax 49-228-3894-180, E-mail huffman@iza.org Sunde: Senior Research Associate, Institute for the Study of Labor (IZA) and CEPR, P.O. Box 7240, D-53072 Bonn, Germany. Phone 49-228-3894-221, Fax +49-228-3894- 180, E-mail sunde@iza.org ABBREVIATION SOEP: German Socio-Economic Panel Economic Inquiry (ISSN 0095-2583) doi:10.1111/j.1465-7295.2007.00082.x Vol. 46, No. 1, January 2008, 84���90 �� 2008 Western Economic Association International 84

of reciprocal types in the population, however, is one crucial factor for predicting the im- pact of institutions and whether reciprocal or selfish types dominate market equilibrium outcomes (see, e.g., Falk and Fischbacher 2006). We find that moderate to strong positive reciprocity is the norm, whereas negative rec- iprocity is relatively more heterogeneous. We next explore how trust and reciprocity are related. Positive reciprocity and negative reciprocity turn out to be only weakly corre- lated for individuals, which suggests that these are distinct traits rather than two sides of the same coin. This finding is relevant for models of fairness preferences. We also find that peo- ple who are strongly negatively reciprocal are less willing to trust. This is consistent with neg- atively reciprocal types being those who are most upset by betrayal. It implies that while negatively reciprocal individuals may contrib- ute to a climate of trust in a population, by credibly threatening to punish opportunistic norm violators (see the discussion in Fehr and Gachter �� 2002), they may be less trusting themselves. We find only a very weak positive correlation between trust and positive reci- procity. Thus, people who trust are not neces- sarily those who are trustworthy. We also investigate determinants of indi- vidual differences in trust and reciprocity, focusing on factors that are exogenous to the individual: gender, age, and height. These characteristics have a significant impact on trust and reciprocity, but the effects vary in interesting ways, providing further indication that these are distinct traits. The exogenous factors remain significant when we control for a wide variety of other observable charac- teristics. Finally, we provide the first survey evidence on how trust, positive reciprocity, and negative reciprocity relate to personality type, as measured by the standard Big Five scale from psychology. Mapping personality measures from psychology into measures of economic preferences is an important but largely unexplored avenue for research on eco- nomic decision making (Heckman, Stixrud, and Urzua 2006). We find that the psychometric measures do have predictive power for both trust and reciprocity. The next section describes the data. Section III presents results on prevalence and the rela- tionship between trust and reciprocity. Section IV explores determinants of social preferences, and Section V concludes. II. DATA Our data come from the 2003 and 2005 waves of the German Socio-Economic Panel (SOEP). The SOEP is a representative panel survey of the resident population of Ger- many.1 The SOEP surveys the head of each household in the sample but also gives the full survey to all other household members over the age of 17. Respondents are asked for a wide range of personal and household information and for their attitudes on assorted topics. In the 2003 wave, the SOEP survey included three questions about individuals��� trust attitudes. These are similar to the stan- dard measures of trust used in other surveys, for example, the General Social Survey. Sub- jects were asked to indicate on a 4-point scale to what extent they agree or disagree with the following statements:2 (a) In general, one can trust people (b) These days you cannot rely on anybody else and (c) When dealing with strangers it is better to be careful before you trust them. The four answer categories were labeled: strongly agree, agree somewhat, dis- agree somewhat, and strongly disagree. In the 2005 wave of the survey, six different measures of reciprocity were included in the SOEP for the first time. Respondents were asked to indicate on a 7-point scale how well each of the following six statements (trans- lated from German) applies to them person- ally:3 (1) If someone does me a favor, I am prepared to return it (2) If I suffer a serious wrong, I will take revenge as soon as possible, no matter what the cost (3) If somebody puts me in a difficult position, I will do the same to him/her (4) I go out of my way to help some- body who has been kind to me before (5) If somebody insults me, I will insult him/her back (6) I am ready to undergo personal costs to help somebody who helped me before. An answer of 1 on the scale means: ������does not apply to me at all������ and choosing 7 means: ������applies to me perfectly.������ Importantly, Questions (1), (4), and (6) ask about positive reciprocity, while 1. For more details on the SOEP, see www.diw.de/ gsoep/. 2. German versions of all six questions are available online, at the following Web site: www.diw.de/deutsch/sop/ service/fragen/fr2003/personen_2003.pdf. 3. German versions of all six questions are available online, at the following Web site: www.diw.de/deutsch/sop/ service/fragen/fr2005/personen_2005.pdf. DOHMEN ET AL.: REPRESENTATIVE TRUST AND RECIPROCITY 85