When the State Gives Back: Trust and Trustworthiness after a Land Restitution Program

Abstract

Recent research in Economics has sought to understand the effects of exposure to violence on individual preferences, including pro-social behavior. Here, we assess the impact on pro-social behaviour of a governmental program to compensate victims of forced displacement. All our subjects have been officially recognized as victims of a conflict, and, as such, are eligible to apply for restitution of their land within the "Victims’ Law" (Ley de Victimas, Bill 1448/2011). The key independent variable of our analysis is whether a subject has obtained land back within this or similar programs. Our dependent variables are a subject's trust and trustworthiness in unknown persons, as measured in a modified version of a Trust Game. We focus on inter-personal trust and trustworthiness because of their well-documented positive effect on economic development. Our design includes a treatment in which subjects vote on their most preferred outcomes to understand whether forms of consultative democracy can engender higher mutual trust. We find that land restitution significantly raises trustworthiness, while there is no effect on trust. This confirms previous insights that trust and trustworthiness tap into different aspects of pro-sociality. Voting does not improve either trust or trustworthiness. The results are robust to controlling for socio-economic status within regression analysis and to the omitted variable bias.