Inequality Aversion and Stochastic Decision-making: Experimental Evidence from Zimbabwean Villages after Land Reform

Abstract

Inequality considerations are a motive for making positive offers in the Ultimatum Game and rejecting small ones, but decision error could have the same effect. I find evidence for both of these considerations and a different relative importance amongst Zimbabwean villagers, of whom some resettled after a government organized land reform during the 1980s. Resettled villagers have higher inequality aversion and lower decision error than those who live in traditional villages but, after accounting for different levels of inequality aversion, the difference in decision error between both groups of villagers s no longer signi cant. There are no gender differences in preferences. The model estimated was rst used by De Bruyn and Bolton (2004) on a large set of bargaining data but the best t of 64 percent overall coincidence of observed and predicted behavior s achieved for a different symmetric speci cation of inequality aversion in the model. As the use of eld data is a recent development in experimental economics, I reestimate he model applied to the Zimbabwean data on the laboratory Ultimatum Game data of Roth et al. (1991) and further eld data from Henrich et al. (2005). Estimates are compared comprehensively.