Opportunity Is Not Everything:

Transcription

1 Opportunity Is Not Everything: How Belief Systems and Mistrust Shape Responses to Economic Incentives Karla Hoff and Priyanka Pandey * The World Bank Abstract. We experimentally investigate in village India how belief systems that hierarchize social groups affect the groups responses to economic opportunities. Earlier we found that making caste salient hurt low caste performance absolutely and relative to the high caste s. To examine the possible role of mistrust, we manipulate the scope for discretion in rewarding performance. When offered a gamble in which success mechanically triggers rewards, making caste salient has no significant effect. Instead, it is in the case with scope for discretion that making caste salient creates a large caste gap in the proportion of subjects who refuse the gamble. Keywords: Social norm, Experiment, Caste, Inequality JEL codes: C90, 017, Z13 * We are grateful for helpful comments to participants in seminars at MIT and Boston University and at the MacArthur Norms Network and the Cornell-MIT-LSE Conference on Behavioral Economics and Development. We thank Ken Sokoloff for helpful comments on an early draft, and an anonymous referee for many constructive suggestions. We thank the World Bank and the MacArthur Network on Inequality and Economic Performance for financial support. khoff@worldbank.org and ppandey@worldbank.org.

2 Subordination of one people by another is undertaken not only by force; it also has a cultural component. This suggests the possibility that when the coercive structures that enforce subordination are dismantled, the cultural beliefs remain and play a role in making inequality persistent. In this paper, we use the caste system of India as a setting in which to experimentally investigate that possibility. Historians at least since Arnold Toynbee (1934) have noted that the dominance of one social group over another sets in motion a process of cultural distancing and hierarchizing. A case in point is Latin America, in which [t]he mere act of extending a claim of possession over American Indians changed Spaniards representation of Indians nature. The signs of civility and of shared humanity marveled at by Spaniards in their first encounters faded to insignificance after the formal act of possession (Benton, p. 12) As the structure of legal authority that enforces subordination is established, it becomes intertwined with a belief system that represents the subordinate social group as inherently inferior. 1 That belief system may continue to shape social identities, perceptions, and expectations long after state-sanctioned mechanisms of subordination have been dismantled. In many parts of the world, high inequality between social groups, which historical legal barriers to equal opportunity helped to create, has indeed persisted long after the most debilitating forms of discrimination have ended. 2 This has led some 1 Detailed historical studies of this process which includes both spontaneous elements alluded to in the quotation above by Benton, and also a deliberate role by the dominant group in myth-making are Lorcin 1995 (on Algeria) and Dircks 2001 (on India). 2 Deep economic divides persist between Blacks and Whites in the United States (see, e.g. Loury 2002, Appendix), between former untouchable castes and all other castes in India (Desphande 2002), and between indigenous groups and nonindigenous groups in Latin America (Psacharopoulos and Patrinos (1994).

3 scholars to ask whether and, if so, by what mechanisms, belief systems contribute to the persistence of group inequality. There are many possible channels of influence from belief systems to persistent inequality. One is statistical discrimination: under some circumstances, employers prior beliefs in group differences (where none inherently exist) are self-fulfilling (a review is Arrow 1998). Another is stereotype threat or social identity susceptibility. Many studies have documented that when a particular social identity is made salient, performance in a domain that is stereotyped is altered in the direction predicted by that stereotype. 3 Past research on socio-cultural influences on performance has focused on self-stereotyping. 4 In this paper, we consider an additional way that a belief system that represents a social group as inherently inferior might be self-fulfilling: Belief systems may lead individuals to expect their efforts to be rewarded in a biased way; mistrust then undermines motivation. This leads to the hypothesis that for a social group viewed as inferior, making social identity salient would have a larger effect on behavior when there is scope for discretion in evaluating and rewarding performance than when there is no discretion. No such difference would be observed for the social group that is not stigmatized. This is indeed consistent with the findings that will be presented below for low- and high-caste individuals in India. 3 In a remarkable and well-known study (Steele and Aronson 1995), Black and White college students in the United States were asked to take a test composed of items from the verbal Graduate Record Exam (GRE). In the control condition, the subjects were asked to fill out a questionnaire indicating their major, gender, and other variables (but not race). In another condition, they were asked to also indicate their race. This simple manipulation evoking the race of the person elicited conformity to the U.S. stereotype of Blacks as less intelligent than Whites. The SAT-adjusted mean scores of the Blacks were far worse than those of the Whites in the race-prime condition, whereas in the no-race-prime condition their scores slightly exceeded those of Whites. 4 One exception is Cohen and Steele (2002). They find that barriers of mistrust affect the way that targets of negative stereotypes experience social interactions. 2

4 We should note, at least parenthetically, that an expectation of bias by the target of a stereotype would be rational in light of the experimental evidence on the effect of stereotypes on perception. In their review of the literature in cognitive psychology, Hamilton and Sherman (1994) find that The perceiver is more likely to attend to and notice stereotype-consistent information, to make stereotype-consistent inferences, to recall stereotype-consistent information, and so on. The overall consequence is that the perceiver sees a pattern of information that seems to provide evidence for the validity of the beliefs that themselves influenced the way the information was processed. (p. 48) 5 In total, these various processes demonstrate that one of the primary functions of stereotypes is self-maintenance. (p. 37) Stereotypes thus appear to serve as cognitive structures that guide information processing in a self-confirmatory way. 6 Two sets of results will be presented below. In Experiment 1 (summarized from Hoff and Pandey 2004), 321 low-caste and 321 high-caste junior high school male students in north India are asked to solve mazes under various incentive schemes. In some cases, caste is made salient though public announcement of the children s caste. When this occurs, the average performance of low-caste individuals is significantly worse both 5 A recent experiment by Stone, Perry, and Darley (1997) provides a nice example. Their title captures the main finding: White Men Can t Jump: Evidence for the Perceptual Confirmation of Racial Stereotypes Following a Basketball Game, In the experiment, all participants (who were White) listened to the same running account of an athlete s basketball performance on the radio. Half the participants were led to believe that the target player was White, and half that he was Black. A survey that the participants filled in after the end of the radio broadcast indicates that information was less likely to be absorbed if it was discordant with the prevailing U.S. stereotypes of Blacks as poor intellects but strong athletes compared with Whites. The White target player was perceived as exhibiting less natural athletic ability but more court smarts, whereas the Back target player was perceived as exhibiting fewer court smarts but more natural athletic ability. These conflicting beliefs were generated through nothing more than manipulating the beliefs of viewers about the racial identity of the athlete. 6 A recent study of the effect of stereotyping on judgment finds that prison inmates with more Afrocentric features receive harsher sentences than those with less Afrocentric features, controlling for race and criminal history (Blair, Judd, and Chapleau 2004). A theory of the effects of bias on information processing is in Rabin and Schrag (1999). A theory of the effects of categorical cognition judging individuals not by their own characteristics but by the average characteristics of the group with which they belong is in Fryer and Jackson (2003). 3

5 relative to their performance when social identity is not made salient and relative to the performance of the high caste. To examine the possible role of mistrust, in Experiment 2 we devised a condition that manipulates the scope for judgment in rewarding performance. We recruited a new set of 270 low-caste and 270 high-caste junior high school boys in north India. When asked to accept or reject a gamble in which there is no scope for judgment by an experimenter, we find that making caste salient does not produce a caste gap. Instead, it is in the case where there is scope for judgment that making caste salient has an effect. Analysis of the results offers some support to the hypothesized process underlying the underperformance of low-caste individuals in Experiment 1. I. Notes on the Caste System in India As background to the experiments, we provide brief notes on the caste system. 7 The caste system in India can be described as a highly stratified social hierarchy, in which largely endogamous groups of individuals are invested with different social status and social meaning. The Hindu belief system uses idioms of purity and pollution to explain the hierarchy. At the top are the high castes that are considered to be pure Brahmin, Kshatriya (Thakur) and Vaishya castes. At the bottom or, more accurately, beneath the caste hierarchy, are the social groups traditionally called untouchables and historically denied all civil rights. Caste membership is inherited and a single individual cannot alter it, although over the long term the political fortunes of particular groups have been crucial in shaping 7 A more extensive discussion and references to the literature are in Hoff and Pandey (2004). 4

6 the ways in which the groups were situated within the caste hierarchy (for illustration, see the historian Nicholas Dirks, 2001, pp ). Under the one and one-half centuries of British rule, the British exploited the caste system to justify a social organization that put high castes in administrative positions and maintained the low castes in generally oppressive conditions under the authority of local high-caste individuals. According to Dirks (p. 9), the caste system was a cultural technology of rule that sustained British power in India as much as did the power of superior arms. After independence in 1947, India abolished the caste system and established reservations in government and universities for castes characterized by extreme social, education and economic backwardness arising out of the traditional practice of untouchability. 8 However, the hierarchy of the caste system and the stigmatization of traditionally untouchable castes remain a very visible part of the society, especially in rural north India, as we discuss further below (Section V). II. Methodological Overview The objective of the experiments is to determine whether increasing the salience of caste identity changes the ability or propensity of low-caste subjects and high-caste subjects to respond to economic incentives. Therefore the experiments confront the subjects with an actual economic opportunity. Our data is on performance (Experiment 1) and on the 8 Department of Social Justice and Empowerment, Government of India. Scheduled Caste is the official designation of a formerly untouchable caste, which in this paper we refer to as a low caste. A second official designation under Indian law is Other Backward Castes, which comprises traditional caste groups that were ranked above the untouchables but which, like them, were relegated to menial tasks that involved providing service to the higher ranked castes. All other caste groups, which have no official recognition under Indian law, we refer to in this paper as high castes. In 2001, Scheduled castes represented approximately 16 percent of the total population of India, and 21 percent of the population of the state of Uttar Pradesh (the site of our experiment).. 5

7 willingness to accept a gamble (Experiment 2), as we vary the salience of caste. In addition, Experiment 2 presents evidence on how the salience of caste interacts with the discretion or subjectivity that the experimenter has in rewarding performance. We chose as subjects 6 th - and 7 th -graders in the north Indian state of Uttar Pradesh. 9 In a household survey conducted in a village near the site of the experiment, we found that 95 percent of children of the lowest caste (Chamar) age were in school, whereas the fraction of rural children attending high school in Uttar Pradesh according to the National Sample survey ( ) is 59 percent. Thus the subjects are likely to be representative of children in north India. Another problem that needs to be addressed is the generalizability to adult behavior of experimental findings using children. We are aware of only one experiment that examines the effect of activating a social identity on the behavior of children. Ambady et al. (2001) provide evidence that identity activation affects children at an early age in a way similar to the effect on college students, as demonstrated in Shih, Pittinsky, and Ambady (1999). There is also a growing experimental literature on the economic behavior of children, which finds in a number of domains (rational choice behavior, altruism, and strategic behavior) only small differences between the behavior of 11-and 12-year olds and adults. 10 According to Harbaugh, Krause, and Berry (2001), in rational choice behavior over consumption, college students do no better than 11-year-old children. 9 We explain how we recruited children for Experiment 1 in Hoff and Pandey (2004) and for Experiment 2 in Section IV below. 10 See, e.g., Murningham and Saxon (1998) and Harbaugh and Krause (2000). 6

8 The low-caste subjects are all from the Chamar caste. The high-caste subjects are from the Brahmin, Kshatriya (Thakur) and Vaishya castes. 11 A child s caste cannot generally be discerned from his appearance, although in particular cases a low-caste child might reveal his caste by his manner or his clothing. The site of the two experiments was the same junior high school in a village in central Uttar Pradesh, India. For each session we brought subjects into a classroom six at a time. Except under the caste-segregated condition, described below, each session included three low-caste and three high-caste children. In post-play interviews in Experiment 1, low- and high-caste subjects, respectively, reported knowing on average 1.40 and 1.47 of the other five in the group. In Experiment 2, where in every case we drew the six individuals in a session from six different villages, the subjects reported knowing none of the other five in the group. The six subjects in a given experimental session did not have the possibility to speak to each other before the experiment took place. Each subject participated in just one treatment (and in just one experiment). Three conditions provided a contrast in the salience of caste: No identity salient. In this condition, no personal information about participants was announced. Caste announced. At the beginning of a session, the experimenter turned to each of the six participants and stated his name, village, father s name, paternal grandfather s name, 11 All low-caste subjects belonged to the Chamar caste, the principal low caste in Uttar Pradesh. The three high castes that subjects came from are Thakur, Brahmin, and Vaishya castes. In Experiment 1, Thakur, Brahmin, and Vaishya, respectively constituted 70, 24, and 6 percent of the high-caste subjects. We recruited subjects from one low caste but three principal high castes because several Chamar caste households lived in every village we visited in the area covered by our experiment, whereas not every village had several households belonging to each of the three high castes. 7

9 and caste. The experimenter asked the participant to nod if the information was correct. 12 Caste Segregated and Announced (Segregated, for short). This condition was the same as the preceding one except that the six-person group included only low-caste or only high-caste individuals. Note that the probability of a combination of six low-caste or six high-caste children from a random draw of six subjects from all boys in grades 6 and 7 in schools around the site of the study was near zero (less than.001 for low caste and the high caste). Thus, in the third condition, the participants are likely to have known that the segregation was deliberate. III. Summary of Experiment 1 (Hoff and Pandey 2004) In Experiment 1, we asked subjects to solve mazes in two 15-minute rounds under various incentive schemes. The incentive was piece rate in the first round but varied across treatments in the second round. In all treatments, the (objectively) expected payment per maze solved was one rupee (about 2 US cents). Not counting the show-up fee, the top performers earned 2.5 times the daily unskilled wage in a session that lasted about one hour; average earnings were slightly less than one-half the daily unskilled adult wage. Table 1 and Figure 1 present the average caste gap in Round 2 of each incentive scheme -- Piece rate, Tournament (winner-take-all), and Random Winner. (Not all 12 The experimenter used the traditional name, Chamar, for the low caste. This name is still in widespread use in the area in which we conducted the experiment. The name Chamar is recorded in the schools enrollment books. Villagers, including children, commonly refer to a village person by the traditional name for his caste: a Chamar caste person is referred to as Chamar and a Thakur caste person as Thakur. 8

10 incentive schemes were run under all salience-of-caste conditions.) The vertical axis in the figure measures the difference between the average number of mazes solved by lowcaste and high-caste subjects. The first bar in the figure shows that the low caste outperform the high caste in the no-identity-salient condition, but not significantly. 13 The announcement of caste reduces the average number of mazes solved by low-caste subjects under piece rate incentives by 25.2 percent (from 5.72 to 4.28 mazes) but does not significantly change high-caste performance. The announcement of caste thus creates a significant caste gap (-1.83 mazes, p-value =.04). FIGURE 1. CASTE GAP IN MEAN PERFORMANCE AS A FUNCTION OF WHETHER AND HOW CASTE IDENTITY WAS PRIMED Average low-caste score average high-caste score 0.5 No identity salient Caste announced Caste announced No identity salient Caste announced Caste segregated and announced Piece Rate Tournament Random Winner Consider next the tournament incentive (see the middle three bars in the figure). Here the announcement of caste reduces the average number of mazes solved by both low 13 To test significance, we used the Mann-Whitney U-test, which is a non-parametric test of whether the two samples come from same population. 9

11 caste and high caste subjects, and there is no significant caste gap in performance. However, moving from the caste announced condition to the segregated condition significantly reduces mean performance of the low caste (p-value =.01). 14 The average number of mazes that the low caste solves falls from 6.8 when no identity is salient, to 4.75 mazes when caste is announced, to 3.05 mazes in the segregated condition (a single caste tournament). In the segregated condition, there is a significant caste gap in mean performance [-1.78 = 3.05 (low) 4.83 (high)], as shown in the figure (p-value =.02). The last bar in Figure 1 depicts the caste gap under an incentive scheme called Random Winner. In this scheme, a person chosen at random from the six players in a session is paid 6 rupees per maze, and all others receive nothing. The mean return per maze solved is thus one rupee, as in all other incentive schemes. Explaining the concept of randomness was facilitated by the use of slips of paper on which each participant wrote his name. The experimenter s assistant showed how the slips would be tossed together in a glass jar, from which one folded slip would be chosen at the end of the experiment. Moving from Piece Rate with Caste Announced to the Random Winner treatment raises the mean performance of the low caste and thereby eliminates the significant negative caste gap that occurred in Piece Rate with Caste Announced. The low caste now outperforms the high caste, but not significantly. 15 The results in Random Winner cannot plausibly be explained by caste differences in risk aversion or in optimism, since the absence of a caste gap in the tournament 14 Segregation also reduces significantly the performance of the high caste (p=.02). One reason for this could be that while the low caste expect to do worse, the high caste expect to do better because they are viewed as intrinsically worthy and therefore, they exert less effort. 15 The p-values comparing performance in Round 2 between Random Winner and Piece Rate (no identity salient) are.91 and.56 respectively for low and high castes. 10

12 treatment (no identity salient) suggests that caste groups do not differ in that respect. A more plausible explanation, which we explore in our second experiment, is that the announcement of caste interacts with the introduction of randomness. Low-caste individuals might interpret the introduction of randomness in choosing the winner as a signal that the experimenter eschews the use of social identity in evaluation, and such a signal might raise the low caste participants subjective expectation of the return to effort. Alternatively, the introduction of randomness in choosing the winner might have a pure psychological explanation: randomness implicitly makes caste identity less salient. We consider one last feature of the data in Experiment 1 the improvement by players between rounds. Figure 2 shows, for each decile, the cumulative proportion of the low caste among all the participants whose Round 2-Round 1 score ranks them at or above this decile. 16 If there were no caste differences in performance, all graphs would be at the 50 percent line in the figure. In the two treatments in which no identity is salient, the graphs are very close to the 50-percent line except in the top-scoring deciles, where the graphs are generally above the line because the low caste is over-represented among the best performers. 16 For example, if the top 20 percent of subjects were to be selected based on performance in Piece Rate, the figure shows that this would result in a low-caste proportion of approximately 63 percent: the low caste out-performs the high caste at the highest levels of performance. But the comparable figure for Piece Rate with Caste Announced is 37 percent; in that social context, the low caste is starkly underrepresented at the highest levels of performance. 11

13 FIGURE 2. CUMULATIVE PROPORTION OF LOW CASTE IN EACH DECILE IN ROUND 2 - ROUND 1 SCORES Cumulative proportion of low caste Random winner Piece rate, no identity salient Tournament, no identity salient Tournament, caste announced Piece rate, caste announced Tournament, caste segregated and announced Decile (1=top decile) The 50 percent line divides the six graphs fairly cleanly into two groups. The results in the no-identity salient condition (indicated by hollow markers), together with results in Random Winner, are in the top half of the figure. The results, except Random Winner, in which caste is announced (indicated by solid markers) are in the lower half. - The Segregated condition (under the tournament incentive) gives the low caste the lowest representation among all performance deciles, whereas randomness in the determination of the winner gives the low caste the highest representation. The experimental results are consistent with two explanations. One is that making caste identity salient debilitates performance because of a social psychological response (e.g., self-stereotyping). In this view, the boost to low-caste performance in 12

14 Random Winner arises because the randomization process makes social identity less salient. A second explanation is that making caste identity salient leads the low caste to expect prejudicial treatment. In this view, the results under Random Winner arise because the randomization process signals that the experimenter will not treat low-caste participants unfairly. One weakness of this explanation is that Random Winner does not eliminate the scope for discretion in evaluating performance: the subjects do not watch the grading of the mazes, and they do not watch the experimenter pull a name out of the jar at the end of the experiment and then reward that person. 17 Our second experiment uses a new experimental design that reduces this ambiguity by making the link between performance and rewards mechanical in some treatments, but not in others. IV. Experiment 2 A. Experimental design A year later (March 2004) at the same site, we conducted a new experiment that manipulates the scope for discretion in rewarding performance. In the experiment, players practice a task and then are offered the choice to accept or refuse a gamble that they will succeed at the task. The scope for discretion in evaluating success varies across three experimental conditions, called gambles A, B, and C. In gamble A, the task is to solve a puzzle and there is no scope for judgment or discretion in the assignment of rewards: success mechanically triggers its own reward. In gamble B, the task is again to solve the puzzle, but now there is scope for judgment according to objective criteria. In 17 As is usual in experiments, a player s earnings are private information; the experimenter drew a name out of the jar in private at the end of the experimental session. 13

15 gamble C, the task is to make a beautiful pattern and so the criteria for success are subjective. We describe each gamble below. Gamble A: No scope for discretion. The task is to solve a puzzle based on the game Rush Hour-Traffic Jam. A player physically gains possession of the success payoff by freeing his car from a traffic jam. To do this, he needs to move other vehicles on the 12- inch square wooden board backwards or forwards along a grid in order to create a path for his car to the exit. The board is constructed in such a way that only the player s car can get free of the board. A 20 rupee note (about 45 U.S. cents) is visible through the dashboard of the player s car. A player who solves the puzzle obtains his success payoff by taking it from the underside of the car. A player who does not solve the puzzle is given 1 rupee by the experimenter. Gamble B: Scope for discretion objective criteria. This gamble is the same as gamble A except that the game board no longer has a frame. Without the frame, nothing prevents the player from sliding vehicles off the tracks and thus trivially solving the puzzle. The experimenter states, All around the roads are wheat fields. To solve the puzzle, you have to free the red car [the player s car] from the jam by moving cars in such a way that no car comes off the road. Otherwise the fields will be damaged The person in the room who will give you the puzzle will watch you. If he thinks you have solved the puzzle the right way, he will give you 20 rupees. If he thinks you have not solved the puzzle the right way, he will give you 1 rupee. Gamble C: Scope for discretion subjective criteria. The task is to make a beautiful pattern by gluing squares of colored paper onto a blank sheet of white paper. We provided four examples of beautiful patterns, which were simple geometric patterns that other players had made in the pilot experiment. Participants are told that they cannot copy those patterns, but have to make their own patterns. 14

16 Sixty individuals 30 low caste and 30 high caste participated in each treatment (three gambles, each under three conditions of caste salience), for a total of 540 subjects. To recruit the subjects, we used a procedure designed to ensure that subjects did not know each other. Every day over a period of 11 days our team went to six randomly selected villages within a 20 kilometer radius of the site of our experiment. From every village, we drew high caste and low caste children from the public junior high school that served that village and the neighboring villages. The strategy we tried to follow to recruit subjects was to ask the teacher of the village public school for the school register, which usually had names of children listed alphabetically. 18 With the teacher s help, going down the list we chose the number of high - and low - caste children needed from the village for our trials on that day. On each day of the experiment, we recruited subjects from a different set of villages. We formed the six-person groups by taking one subject from each of the six randomly selected villages. Thus on a given day, subjects in an experimental session came from six different villages and did not know each other. If a treatment was conducted over more than one day, we check that our results are not driven by differences in the pool of villages across days. 19 Our team consisted of high caste as well as low caste men and women, all from Uttar Pradesh. One of the authors (Pandey) conducted that portion of every session in 18 We had a letter from the District Magistrate that instructed the teachers to cooperate with our team. 19 For each of the nine treatments, if the treatment lasted more than a day, we do a test of proportions to test for differences across days in the fraction of subjects refusing the gamble in that treatment. The results are not driven by such differences. 15

17 which the task was explained and the participants made their decision to accept or refuse the gamble. These decisions are the data of the experiment. At the beginning of a session, each participant received a participation fee of 10 rupees to bring home the idea that the game involved money. In gamble A, participants obtained their fee by solving a practice puzzle. By solving the puzzle, a player freed his car from the traffic jam and could take a 10 rupee note from the underside of the car. If he could not solve the practice puzzle in the eight-minute practice period, the experimenter handed him a 10 rupee note. In Gambles B and C, the experimenter handed each player the participation fee. The experimenter showed the subjects how to do the task and gave them time to practice: eight minutes to practice solving a puzzle that each child found at his place on the mat on the classroom floor, and five minutes to practice gluing squares onto a plain sheet of paper. (The instructions are in the Appendix.) After the practice period, she told participants that she would ask them to make a choice. They could choose the gamble (with a success payoff of 20 rupees and a failure payoff of one rupee) or they could opt out and receive 10 rupees. To check the players understanding, she asked each player a question about the reward system using a hypothetical example of accepting the gamble and winning, accepting it and losing, or rejecting it. She did not proceed until he had answered a question correctly. Then the six subjects formed a line, were reminded not to speak among themselves, and entered a separate area one-by-one where they privately conveyed to the experimenter their decision to accept or reject the gamble. A subject who accepted the gamble was escorted to a room where he played the Traffic Jam game or made the design under supervision of hired staff. The period in which the instructions 16

18 were explained and the child made his decision to accept or reject the gamble, lasted from minutes for gambles A and B, and minutes for gamble C. Before participating in the experiment, all subjects stayed in a separate classroom where a monitor entertained them. A subject s movements after he conveyed his decision would reveal to the other children in a session his choice, but the subjects did not know that at the time they made their decision. The revelation of their decision does not affect our experimental data (players decision to accept or refuse the gamble). 20 We summarize the time line as follows. First, six buses carrying children and one to two team members arrive, one by one, at the experiment site. The children are coded, and enter the in-classroom where they wait until called to participate. When a child s group is called, he and the five others in his group go to the experimenter s classroom next door. The experimenter goes through the instructions. The experimenter then asks the children to form a line and not to talk to each other. Each child in turn goes to a private area and indicates his choice to the experimenter. Depending on his choice, the child is then escorted to one of two areas (the room in which to play the gamble, or the post-play interview room), although ultimately every child is escorted to the post-play interview room.. The child waits in the out-classroom till the bus is ready to take him home. Given payoffs of 20 rupees for success, 1 rupee for failure, and 10 rupees for opting out, the gamble is a more-than-fair bet if a player s probability of success is 20 It was not practical, given the number of rooms that we had available at the site of the experiment, to fully control the conditions under which subjects performed the tasks in gambles A through C. Only the conditions prior to an individual making his decision were fully controlled. 17

19 above 47 percent. In gamble A, most players were able to solve their practice puzzle within the eight-minute practice session, so that it is plausible that they perceived the gamble to solve a similar puzzle within five minutes as a more-than-fair bet. The puzzles in gamble B were the same as in gamble A. In gamble C, subjects did not know the probability of success because the criteria were subjective. 21 But players could and did make judgments about the probability of success based on the examples we showed of four beautiful patterns. We tried out alternative designs in the pilot and found that when the patterns were more sophisticated, the acceptance rate of the gamble fell sharply. The patterns we ultimately chose as prototypes in the experiment were quite simple, though attractive, and had been made by subjects in the pilot. In gamble A, success triggers its own reward. In this gamble, making caste identity salient can affect the refusal rate only by affecting an individual s expectation of how well he will perform, or how much he will like performing the task that the gamble entails. In contrast, in gambles B and C, there is scope for discretion in rewarding success. Therefore increasing the salience of caste can affect the refusal rate by affecting how his performance will be judged. B. Results Table 1 reports all results. We consider each gamble in turn. Gamble A. In gamble A, in which success mechanically triggers its own reward, low- and high-caste refusal rates do not significantly differ, regardless of the salience of caste (see Figure 3, left panel). The p-values based on the z-statistic are.74,.16 and.64, respectively, in the control condition, Caste Announced, and Segregated. The similarity 21 We chose, as a benchmark to guide our evaluation, to provide those who accepted gamble C a success payoff 80 percent of the time. But we did not give information to participants on this, and they did not receive their payoffs till just before we drove them back to their villages. 18

20 in the refusal rate by low and high castes is perhaps surprising in light of the caste differences in educational achievement and wealth. 22 Compared to Caste Announced, in the Segregated treatment the refusal rate by both caste groups actually falls, although not significantly. Even if the low caste subjects have internalized the idea that success is reserved for the high caste, the self-confidence gained from solving the practice puzzle may immunize them against experiencing a loss of self-confidence when their social identity is made salient, as research with ability-stereotyped groups would suggest (Steele, 1997). Put another way, because they have practiced the puzzles, the subjects may have very little uncertainty about how they would perform in the gamble. FIGURE 3. PROPORTION, BY CASTE, THAT REFUSES GAMBLES A AND B AS A FUNCTION OF WHETHER AND HOW CASTE IS PRIMED Gamble A Gamble B Proportion that refuses the gamble High caste Low caste No identity salient Caste Caste segregated announced and announced 0 No identity salient Caste Caste segregated announced and announced 22 In a very simple literacy test that we administered to each child in post-play interviews, 34 percent of the low caste obtained a score of zero out of a possible five, compared to 20 percent for the high caste. In the numeracy test, the fraction of children who obtained a zero out of a possible four was 38 percent among the low caste, and 21 percent among the high caste. We do not have landownership figures for the households of subjects in Experiment 2, but we do have such data for a subsample of households in Experiment 1. Among the sample of children going to public school, we find that mean household land wealth in acres is 1.04 (standard deviation 1.1) for the low caste, and 2.47 (standard deviation 2.38) for the high caste. 19

21 Gamble B. In gamble B, the demonstration and practice puzzles are the same as in gamble A, but the frame of the game board is removed. To be counted as successfully solving the puzzle, a player must exercise care, as he tries out possible solutions, that no vehicle other than the player s car crosses the edge of the board. He can easily achieve this if he places his hand at the side of the board when he moves a vehicle near that side, but a player might not think of doing that. Removing the frame from the game board does three things: it makes the game a bit more difficult, it introduces ambiguity since a player might not know if he had committed a violation or not, and it introduces a role for discretion by an evaluator who must judge whether or not a vehicle has crossed the edge of the board. The right panel in Figure 3 reports results for gamble B. Consider first the case when no identity is salient. The refusal rate in gamble B is significantly greater than in gamble A (p-values are.003 for the low caste and.04 for the high caste). 23 But there is no significant caste gap (p-value =.20), just as there was not in gamble A. This suggests that it is the increase in the difficulty of the game, and perhaps also aversion to ambiguity, that increase the refusal rate in gamble B compared with A, while the change in the performance requirements of the game affects low and high castes in a similar way. Consider next the results under the segregated condition. The low caste now refuses the gamble at more than twice the rate of the high caste. Moving from gamble A to B raises the refusal rate by the low caste from 10 to 67 percent, and by the high caste, from 7 to 30 percent. The p-value of the refusal proportion of the low caste compared to the high caste is Based on the Mann-Whitney test, the p-values are.004 and.05 for the low and high castes, respectively. 24 The corresponding p-value based on the Mann-Whitney test is

22 If the explanation for the increase in the refusal rate by the low caste is that they have internalized the stereotype that being successful is for the high caste, then increasing the scope for discretion in the evaluation of performance should not affect the refusal rate. However, if the expectation of prejudicial treatment causes the change in the refusal rate, then increasing the scope for discretion should widen the caste gap, which is consistent with what we observe. We do a caste-wise test of difference in differences in the refusal rate between gambles A and B across two experimental conditions no identity salient versus segregated. Table 3 and Figures 4 and 5 show the results. For the low caste, the effect of making caste salient is to raise the difference in the refusal rate in gamble B compared to A; for the high caste, making caste salient has no effect (one-sided p-values of.09 and.50, respectively, for low and high castes). 25 These results provide some support for the conclusion that the differential caste behavior (when caste is made salient and there is a scope for discretion) is not driven by differences across castes in ambiguity aversion, since such differences are differenced out in this test, but rather by the low caste s expectation of prejudicial treatment. In the Caste Announced condition, the experimenter has signaled less concern with caste than in the Segregated condition. Under this condition, the caste gap in the refusal rate in gamble B is not significant (p- value =.79 ). 26 To recapitulate the results, when the link between performance and payoffs is 25 The high p-value of.09 for the low caste likely results from a small sample size when testing for difference in differences in proportions. For the high caste, the high p-value of.50 results from the difference in differences in proportions being exactly zero, i.e, the numerator in the t statistic being zero. 26 The p-value based on the Mann-Whitney test is identical to that based on a two-sample test of proportions. 21

23 mechanical, making caste salient does not significantly affect the refusal rate. Instead, it is in the case where there is scope for discretion by a judge of performance that making caste salient creates a caste gap. 22

24 FIGURE 4. DIFFERENCE IN DIFFERENCES IN THE PROPORTION REFUSING THE GAMBLE: LOW-CASTE SUBJECTS Gamble A. No scope for bias Gamble B. Scope for bias 0.8 High caste Low caste 0.8 Proportion that refuses the gamble No identity salient Caste segregated and announced 0 No identity salient Caste segregated and announced FIGURE 5. DIFFERENCE IN DIFFERENCES IN THE PROPORTION REFUSING THE GAMBLE: HIGH-CASTE SUBJECTS Gamble A. No scope for bias Gamble B. Scope for bias Proportion that refuses the gamble No identity salient Caste segregated and announced 0 No identity salient Caste segregated and announced 23

25 Gamble C. In gamble C, there is scope for discretion in the evaluation of performance and the success criteria a beautiful design are subjective. Table 2 and Figure 6 present the results. A significant caste gap emerges only in the segregated condition (p-value =.03). 27 FIGURE 6. PROPORTION, BY CASTE, THAT REFUSES GAMBLE C AS A FUNCTION OF WHETHER AND HOW CASTE IS PRIMED Gamble C Proportion that refuses the gamble High caste Low caste No identity salient Caste announced Caste segregated and announced Compared to gamble A, both the low and high castes are more likely to reject gamble C. This may be because subjects view success as unlikely and/or because they feel uncertain about their likelihood of success and are averse to ambiguity. Table 4 gives the p- values for the difference in differences in the refusal rate between gambles C and A across two experimental conditions (Segregated versus No Identity Salient). For the low caste, the effect of making caste salient on the difference in refusal rate between gambles A and C is 27 We checked for robustness of the caste gap within each type of gamble controlling for parents education and occupation (we do not have data on land owned by a child s family). But since the left-hand side variable and all the right-hand side variables including caste are dummy variables in these regressions, there is relatively little variation in the occupation and education variables once caste is controlled for, given the small sample size. This tends to make the standard errors high in the regressions as also the p- values. 24

26 significant (one-sided p-value =.08). For the high caste, this difference in differences is insignificant (one-sided p-value =.24). These results, and their interpretation, mirror the results discussed above for the difference in differences test of gambles A and B. V. Discussion The main finding of Experiment 1 is that making caste identity salient produces a large and robust decline (controlling for parents land, occupation, and education) in the performance of the low caste, both absolutely and relative to the high caste s performance. To examine the possible role of mistrust, we manipulate the scope for discretion in rewarding performance in Experiment 2. In this experiment, we investigate whether making caste salient has a larger effect on the willingness to take a gamble when there is scope for discretion in rewarding performance than when there is not. By analogy with Figure 1, Figure 7 summarizes the results on the caste gap. When there is no scope for discretion (gamble A), there are no significant differences between castes in the proportion that refuses the gamble, and making caste identity salient has no significant effects. 28 Instead, it is in the case where there is scope for discretion that making caste salient (by segregating and announcing caste) discourages the low caste from accepting the gamble (gamble B), and creates a large and significant caste gap (gambles B and C) In gamble A, the p-values for the difference in refusal rates across experimental conditions (no identity salient versus caste announced, no identity salient versus segregated, and caste announced versus segregated) are.75,.28 and.16 respectively for the low caste. For the high caste, the corresponding values are.45,.23 and The treatment effect within caste is significant at the 7 percent level for the low caste in gamble B, but is not statistically significant in gamble C. In gamble B, the p-values for the difference in refusal rates across experimental conditions (no identity salient versus caste announced, no identity salient versus segregated, and caste announced versus segregated) are.30,.42 and.07 respectively for the low caste. For the high 25

27 FIGURE 7. CASTE GAP IN REFUSING THE GAMBLE Refusal rate by low-caste refusal rate by high-caste No identity salient Caste announced Caste segregated and announced p=.74 p=.16 p=.64 p=.20 p=.79 p=.004 p=.26 p=..61 Gamble A Gamble B Gamble C p=.03 Note: p-values are based on the z-statistic for a two-sample test of difference in proportions that assumes normality. The null hypothesis is that that the proportions of subjects refusing the gamble are equal for the low caste and high castes in the population. Because our sample sizes are small, we also report in Table 2 the corresponding p-values based on the Mann-Whitney test. There are several possible explanations for these results. All individuals of low caste would have experienced discrimination. Finding themselves in a single caste group might remind them that members of higher castes are unwilling to live in their neighborhood or to mingle with them in their day-to-day activities, and that the reason for that is that their caste is held in disrepute. In a survey conducted near the site of the experiment, we found that children as young as seven are acutely aware of caste their own and those of their friends. Play groups are segregated: when asked who their friends are, 75 percent of low-caste children report only low-caste friends and only 6 percent report any high-caste friends, while 87 percent of high-caste children report only high-caste friends and only 3 percent report any low-caste friends (Hoff, Pandey, and caste, the corresponding values are 1.00,.42, and.42, respectively. For gamble C, the corresponding p- values are.43,.30,.80 for the low caste and.02, 1.00,.02 for the high caste. 26

28 Dasgupta, 2005). Responses to the household survey also indicate that caste inequality is ritualized in the way adults interact: 56 percent of low-caste men report that they sit on the ground or remain standing when visiting a high-caste household. Thus, it would be natural for low-caste children that activation of their social identity would lead them to expect discrimination in the gamble. There might be an additional influence on behavior from a difference between the way low-caste and high-caste children expect their actions to be perceived. As discussed above, basic research strongly supports the idea that stereotypes bias perception in a self-confirmatory way. Self-doubt (rather than doubt about the fairness of others) may also play a role in our results. A byproduct of the way we introduced scope for discretion in rewarding performance in the puzzle game (i.e. by removing the gameboard frame in Gamble A) is to increase the difficulty of the task and, thus, the potential role that self-doubt might play when caste identity is primed. However, research on stereotype threat finds that very mild forms of social identity priming generally induce a change in performance in the direction predicted by the stereotype, 30 and yet in our experiment the announcement of caste does not induce any significant change in the refusal rate. This suggests that selfdoubt triggered by priming caste is not the central factor driving our results. If it were, then one would expect that the announcement of caste to make the low caste anticipate performing worse or enjoying the gamble less, which would increase the rate of refusal in all gambles, but especially in B and C where the task is either more difficult or the criteria of success more ambiguous. But we do not see a significant treatment effect of the announcement of caste in any gamble. 30 A survey is Steele, Spencer, and Aronson (2002). A classic experiment is summarized in footnote 3. 27