Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

Questions remain as to whether results from experimental economics games are generalizable to real decisions in non-laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28429
Total Pages:
21
JEL Codes:
B4; C9; D8; O1
Series Statement:
Center Discussion Paper No. 909




 Record created 2017-04-01, last modified 2017-08-24

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