Cross-racial envy and underinvestment inSouth African partnerships

Trust games are employed to investigate the effect of heterogeneity in income and5 race on cooperation in South Africa. The amount of socio-economic informationavailable to the subjects about their counterparts is varied. No significantbehavioural differences are observed when no such information is provided.However, when the information is available, it significantly affects individual trustbehaviour. The low income subjects from both racial groups invest significantly less10 in partnerships with the high income subjects of the other racial group than in anyother partnership. We attribute this behaviour to cross-racial envy, which onaggregate may lead to substantial efficiency losses...