Guilt and Prosocial Behavior: Lab-in-the-Field Evidence from Bangladesh

Abstract

The goal of this study is to examine the relevance of guilt aversion preference in financial decisions. Using data from a lab-in-the-field experiment in rural Bangladesh, this study elicits villagers' unwillingness to fall short of others' expectations-that is, guilt sensitivity-and examines its association with their financial decisions in the field. The experimental result demonstrates a consistent pattern with guilt aversion. It also shows that guilt-sensitive villagers are more likely to repay loans and have better access to credit. These findings could make an important contribution to our understanding of how villagers address moral hazard and limited enforcement problems.