Aid distribution and cooperation in unequal communities

Abstract

We experimentally study aid distribution and cooperation in a field lab in rural Nicaragua. In the first stage of the experimental game, participants contribute to a collective effort that determines the amount of aid given to the group, which is distributed among the players in a second stage. We find that in a treatment where a group representative, selected as the highest contributor, distributes aid, contributions are higher compared to a treatment where aid is equally distributed. The higher amounts of aid attracted, however, benefit representatives only. At the same time, representatives do care about fairness. They give higher aid shares to players with low endowments and lower shares to low contributors. Moreover, representatives with lower relative wealth or who contribute relatively more, keep higher aid shares. With our experimental game simulating community-based development (CBD) schemes, we discuss the implications of our results for elite capture in such schemes. © 2014 UNU-WIDER. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of International Association for Research in Income and Wealth.