Negative Income Shocks, COVID, and Trust

In this paper we report results from an online experiment conducted with over 1, 000 participants from Colombia’s general population. The experiment is designed to examine the impact of exposition to a COVID priming and a negative economic shock on trusting behavior. Overall, we find that participants under the neutral prime who are exposed to a negative economic shock become less trusting. In addition, we find that trustors who receive the shock become more trusting, increasing the proportion of the endowment they transfer. This result is not an artifact of the modification of the trsutor’s action set due to the negative shock received, and is consistent with beliefs of higher returned amount and stronger normative expectations of reciprocity, as well as general pro-sociality.

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