1. 1 Simon Gächter & Elke Renner University of Nottingham Centre for Economic Decision Research and Experimental Economics The Role of Leadership and Beliefs in the Voluntary Provision of Public Goods ESA Rome, 30 June 2007

2. 2 Motivation and Background Field evidence suggests that charitable giving, tax evasion, abuse of the welfare state, criminal behaviour, corruption and corporate culture depend on beliefs about how others will behave. Leaders (managers, politicians, officials) might influence beliefs: “Once you as a CEO go over the line, then people think it‘s okay to go over the line themselves.” Lawrence Weinstein, Head of Unisys “… the most common argument legitimizing tax evasion among Swedes is that those in leading positions in society violate the social norms.” Hammar et al (2005) Two channels: people might reciprocate to leader’s actions and reciprocate beliefs how others will behave. Our goal: Test this argument.

3. 3 Experimental design Basics: 4 subjects form a team 10 periods, “Partners” Individual payoffs:  i = (20 – g i ) + 0.4*  j g j j = 1,..., 4 Two treatments: Control treatment: each team members decides simultaneously. Leader treatment: one team member (“the leader“) decides first. The other three team members ( “the followers“) see the leader contribution and then decide simultaneously. Belief elicitation in both treatments: “Estimate how much the other team members will contribute” Small incentives for correct beliefs

4. 4 Leaders as “belief managers”

5. 5 Determinants of beliefs in the absence and presence of a leader  Contribution of others in the past more important than leader’s current contribution. Path dependency.

6. 6 Path dependency (comparing contributions in period 1 and average of periods 2-10) No-leader treatment Leader treatment

7. 7 Contributions as a function of beliefs (1) For a given belief contributions are the same with and without a leader. Thus, the presence of a leader does not change conditional cooperation.

8. 8 Contributions as a function of beliefs (2)  The presence of a leader makes the beliefs about other followers more important, compared to no leader.

9. 9 The Leader’s Curse

10. 10 Beliefs and Contributions in the absence of a leader

11. 11 Implications for public policy & management Belief effects seem to be important for pro-social behaviour in reality, but understudied. People who believe that others abuse the welfare system (evade taxes, accept bribes) may be inclined to abuse (evade taxes, accept bribes) as well. Politician’s or manager’s behaviour may matter strongly, because their example influences people’s beliefs about others’ behaviour. Corporate culture/social capital may be strongly shaped by leaders and because of inertia and path dependency, hard to change.  May explain why changing norms in organisations is difficult.