Does cronyism pay? Costly ingroup favoritism in the lab

Sheheryar Banuri, Catherine Eckel, Rick K. Wilson

Research output: Contribution to journalArticlepeer-review

Abstract

Cronyism in firms arises when favoritism toward an ingroup affects personnel decisions. Two main motives underlie cronyism: profit, if an ingroup employee works harder; or altruism, if used to transfer resources. In a lab-experiment trust game with naturally-occurring groups, an employer (proposer) faces an employee (responder) who is or is not an ingroup member. We see that both motives play a role. Cronyism is more likely from employers who are more altruistic to the ingroup in a dictator game; and even low-productivity (by design) ingroup members reciprocate trust generously. Cronyism pays for those who engage in it.
Original languageEnglish
Pages (from-to)1092-1110
Number of pages19
JournalEconomic Inquiry
Volume60
Issue number3
Early online date6 Apr 2022
DOIs
Publication statusE-pub ahead of print - 6 Apr 2022

Keywords

  • Cronyism
  • Group Identity
  • Ingroup
  • Discrimination
  • Trust
  • Reciprocity
  • Lab Experiment

Cite this