Research Seminars

This paper investigates whether severe economic hardship undermines preferences for honesty. We use controlled, incentivized measures of cheating for private benefit in a large, diverse sample of 5,676 Kenyans, exploiting three complementary sources of variation: experimentally manipulated monetary incentives, randomized increase in salience of own financial situation, and the Covid‑19 income shock, exploiting randomized survey timing as a natural experiment with respondents surveyed before and during the crisis. We find that severe economic hardship—marked by a 50% drop in monthly earnings— leads to a sharp increase in the prevalence of cheating, from 43% to 72%. Cheating behavior is highly responsive to financial incentives and increases gradually with prolonged hardship. The effects are largest among the most economically impacted and are amplified when salience of own financial situation is experimentally increased. Predictable seasonal income fluctuations, in contrast, do not affect honesty. The results demonstrate that while most individuals exhibit a strong preference against cheating under normal conditions, severe economic hardship substantially erodes honesty.

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How do parents respond to their peers’ choices when deciding whether and how much to invest in their children’s extracurricular education? Using a field experiment, we identify distinct mechanisms through which peer information shapes investment decisions: positive and negative social learning, as well as social utility. Consistent with positive social learning, we find that peers’ willingness to purchase a course increases both parents’ willingness to purchase and their level of investment. Negative social learning effects, however, depend on the nature of the signal.  Explicit peer criticism significantly reduces both willingness to invest and spending, whereas peer non-purchase without negative evaluation has no effect. Social utility effects also vary by peer purchase price: high-price peer purchases increase spending, whereas low-price peer purchases raise a parent’s willingness to invest but do not lead to higher expenditures. We further document heterogeneity in responses to negative peer signals across socioeconomic and residential contexts. Using an enhanced causal forest approach to complement our regression analyses, we find that peer non-purchase without explicit criticism increases purchase preference among parents in less central areas with smaller socioeconomic gaps, but reduces it among parents in central areas with larger gaps.

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