Department of Economics
Manor Road, Oxford OX1 3UQ
Institutional Affiliation: University of Oxford
Information about this author at RePEc
NBER Working Papers and Publications
|February 2017||When No Bad Deed Goes Punished: Relational Contracting in Ghana versus the UK|
with : w23123
Experimental evidence to date supports the double theoretical prediction that parties transacting repeatedly punish bad contractual performance by reducing future offers, and that the threat of punishment disciplines opportunistic breach. We conduct a repeated gift-exchange experiment with university students in Ghana and the UK. The experiment is framed as an employment contract. Each period the employer makes an irrevocable wage offer to the worker who then chooses an effort level. UK subjects behave in line with theoretical predictions and previous experiments: wage offers reward high effort and punish low effort; this induces workers to choose high effort; and gains from trade are shared between workers and employers. We do not find such evidence among Ghanaian subjects: employers do n...