Confianza, adquisicion de informacion y decisiones financieras: Un experimento de campo.
| Autor | Giannatale, Sonia Di |
Trust, Information Acquisition and Financial Decisions A Field Experiment
Introduction
In this paper we analyze individuals' willingness to pay to acquire information about another individual before making a financial decision. To achieve this goal we conducted a field experiment using the trust game (Berg, Dickhaut and McCabe, 1995) with the members of a financial cooperative located in rural Mexico.
The motivation for this analysis comes from the role of information acquisition costs in determining the structure of financial markets, along with transaction costs and contract enforcement costs (Levine, 2005). In particular, information acquisition costs are relevant in credit markets because asymmetric information between the borrower and the lender can lead to adverse selection problems, in which the lender is unable to distinguish between types of borrowers, and moral hazard problems, in which there is a probability that the borrower does not pay the money back to the lender. These types of informational problems arise in credit markets of both developed and developing economies, being the latter more adversely affected by those problems. The role of financial markets in the process of economic development has been largely discussed by some authors; see, for example, Ray (1998). In general, the financial systems of developing countries are characterized by high levels of the three types of costs mentioned above. Moreover, there is empirical evidence that their financial institutions are less efficient than those of the developed countries in fulfilling the objectives of the financial system, such as risk diversification, information production, and allocation and supervision of investment resources (Demirguc-Kunt and Levine, 2001).
On the other hand, there is ample evidence in the literature that social networks and trust play a role in reducing problems of asymmetric information, more so in developing countries, by complementing or substituting formal financial markets and institutions (Townsend, 1994; Foster and Rosenzweig, 1995; Easterly and Levine, 1997; Zak and Knack, 2001; Guiso et al., 2001; Adato et al., 2006; Chantarat and Barret, 2007). The central idea is that social networks develop direct monitoring mechanisms that produce information about the financial behavior of the individuals that belong to such networks. Also, social networks tend to use social sanctions to improve the enforcement of contracts. Hence, social networks might play a role in reducing the informational costs inherent to the financial sector. Furthermore, this literature sustains that the operation of financial institutions is always--regardless of the degree of development--based on trust. Trust and social networks can improve the efficiency of a society by facilitating the coordination of actions (Putnam, 1993). Furthermore, according to Guiso et al. (2001) and Ferrary (2003), the existence of social networks and trust translates into greater degrees of development and institutionalization of the financial sector.
However, some articles (Uzzi, 1996; La Porta et al., 1997a, b; Guiso et al., 2001), based on Fukuyama (1995), state that in societies where family networks prevail, the emergence of large companies and impersonal organizations, frequently observed in developed societies, might show delays. They maintain that family businesses reduce transparency in view of external investors or partners, and that the prevalence of this type of networks is one of the reasons behind the existence of a strong, inefficient informal financial sector in developing countries.
In addition, Lussardi and Mitchell (2009) state that the individuals' educational level and the availability of financial information are partially relevant to assure a suitable handling of personal finances. However, these two elements have not been sufficient to explain the high rates of indebtedness and its possible consequences of non-payment, as well as the low levels of financial forecast for retirement. Intertemporal, social, and risk preferences, participation in networks, and cognitive abilities seem to be more relevant (De Meza et al., 2008; Meier and Sprenger, 2010; Barr et al., 2009).
In this paper we analyze the interaction and relationship between financial decisions, information acquisition and trust. In particular, we work with the hypothesis that financial transactions depend not only on economic variables, but also on variables such as the level of trust, reciprocity and association among individuals. Also, individuals' willingness to acquire and process information relevant to perform financial transactions is related not only to their cognitive abilities, but also to the level of trust they have in the individuals with whom they perform those transactions.
The experimental protocol known in the literature as the trust or investment game (Berg, Dickhaut and McCabe, 1995) has been used to measure the degree of trust and reciprocity between the players. This game has been implemented in laboratories as well as in the field. Karlan (2005) conducted a field experiment in Peru in which individuals played the trust or investment game, and found that the strategies of one type of players correlate with some measures of social capital identified as trust. A similar methodology was used by Johansson-Stenman et al. (2009).
In order to simultaneously study the role of trust and information acquisition behavior when individuals perform financial transactions, we conducted a field experiment using the trust or investment game with two important variations, as well as a survey with the objective of gathering prior information about the potential participants in the field experiment. Our unit of analysis is Caja Mixtlan, a credit and savings cooperative located in the mountains of the state of Jalisco, Mexico. This cooperative has been functioning for over 50 years and serves a rural population in situation of poverty. We expect the information acquisition behavior to be the highlight of our analysis on financial decision making of this population, which is a fairly closed community with supposedly strong ties among family members and cooperative partners. That is, given the characteristics of this community, our hypothesis is that trust is an important component in the process of the individuals' financial decision making, while information acquisition, being an activity that for our experimental subjects is costly and in which they are very likely to be inexperienced, is performed more tentatively and with little sophistication. It is possible that, for those individuals, trust overshadows the role of information acquisition in financial decision making.
The paper is organized as follows: in section I, we present a brief description of our unit of analysis; in section II, we describe our methodology; in section III, we present some of our results; and, in section IV, we offer some concluding remarks.
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Description of the unit of analysis: Caja Mixtlan
We undertook our study based on Caja Mixtlan, a credit and savings cooperative belonging to the unisap Federation located in the Mexican state of Jalisco. We decided to work within the Mexican financial hierarchy, depicted in figure 1, in order to analyze the financial decisions of individuals in a framework that includes the possibility of horizontal and vertical social networks. We chose the unisap Federation because it is one of the federations with greatest financial development and heterogeneity. We specifically selected Caja Mixtlan because it is one of the cooperatives with greatest diversity in terms of the population it serves, and because it has been operating for more than 50 years. Caja Mixtlan is located in a rural area and offers financial services to a population in a situation of poverty.
We use the cluster sampling methodology and select the sampling units taking into account their levels of access to the financial services of Caja Mixtlan. We consider four clusters: Caja Mixtlan's main office (Mixtlan), two branches (Talpa and Atenguillo) and a mobile branch (La Laja). We have to highlight that these four communities are heterogeneous. Talpa is the most developed community because it has the highest level of commercial activity generated by the Sanctuary of the Virgin of Talpa, and a factory of guava products. La Laja is a very remote community located in the mountains, and does not have any commercial activity.
The Talpa and Atenguillo branches are located approximately 21 and 23 kms. from the main office in Mixtlan, and have some 35 and 197 partners respectively. La Laja mobile branch is a meeting point at a distant town, about 145 km. from Mixtlan, where the partners (approximately 154) perform their financial transactions with Caja Mixtlan through a representative of the institution, who travels to La Laja once a week.
The unit of selection and observation consists of the partners of each of the clusters. We take as our primary unit of analysis the partners who are heads of a household. We define the head of a household as the individual who makes the financial decisions within the household. If the head of the household was absent at the sampling moment, we consider the spouse or the second adult (18 years or older) in charge of the household. From a universe of around 1,066 active partners belonging to Caja Mixtlan, we selected a sample of 418 partners. By cluster, the sample is of approximately 195 partners in Mixtlan, 104 in Talpa, 108 in La Laja, and 11 in Atenguillo.
The clusters are located in rural communities in which most of the partners are engaged in activities related to agriculture, livestock, services and small retail businesses. This population is characterized by high levels of migration to the United States or to nearby cities (Guadalajara or Puerto Vallarta), so there are cases where partners are registered in Caja Mixtlan but do not live in the locality...
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