Social Observability and Demand for Transfers: Experimental Evidence from a Low Income Population
Abstract
We examine how social observability affects the willingness of low-income individuals to apply for financial support. After completing tasks to earn income in the lab, participants are given the opportunity to apply for a transfer from a social fund earmarked for the lowest earners. We experimentally vary whether the application is public or private and whether the funds come from the experimenters or other participants. We find that making the application public reduces take-up by 31 percentage points. Adding peer funding leads to a further 10 percentage point drop. These effects are strongest when income is earned through effort instead of a lottery, and when both public visibility and peer funding are present. The findings are not driven by altruistic or redistributive preferences, but perspective taking makes participants more sensitive to the public application treatment. Our findings suggest that ensuring privacy in the application process helps increase access to income support programs.