Essays on Economic Inequality and Social Capital

Economic inequality remains one of the most persistent features of modern economies. While it is often discussed in terms of income and wealth, its reach extends beyond material welfare and is closely linked to patterns of trust, cooperation, and the social relations that underpin collective action. This thesis uses laboratory experiments to examine how inequality, fairness, and the institutional conditions for enforcement and information influence cooperation and social capital. It consists of two parts addressing interrelated questions. Part 1 investigates how inequality and its source affect the foundations of social capital: trust, trustworthiness, coordination, and cooperation. Participants were randomly assigned to equal or unequal endowment treatments, where unequal endowments were generated either by performance in a real-effort task (merit) or by random chance (luck). Participants then make decisions in three canonical games: the trust game, the stag-hunt game, and the prisoner’s dilemma. The results show that inequality weakens trustworthiness and coordination on efficient outcomes, even when participants face identical payoff structures. Trust is lower under merit-based inequality than under luck, despite merit being perceived as fairer. This suggests that perceptions of fairness alone do not necessarily translate to stronger social capital. Part 2 studies cooperation in a dynamic public goods game with wealth accumulation, where each round’s earnings become the next round’s endowment. A 2 x 2 factorial design varied two institutional features: peer punishment, where participants could pay one token to reduce another’s earnings by three, and imperfect monitoring, where contributions were understated with a 25% probability. Under perfect monitoring, punishment raised contributions but not wealth, as the costs of sanctioning offset its benefits and increased inequality within groups. When monitoring was imperfect, punishment proved counterproductive: cooperation fell, wealth declined, and inequality widened. These effects were driven in part by the rise of antisocial punishment, i.e., free-riders targeting cooperators. Taken together, the findings show that neither fairness nor punishment alone is sufficient to sustain cooperation. Inequality undermines trust even when it is perceived as fair, and punishment supports cooperation only when information is accurate.

Name thesis:degree_name

PhD

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Economics

Grantor dc:publisher

ResearchSpace@Auckland

Year dc:date.issued

2026

Author dc:creator

• Sen, Sanket

Advisors dc:contributor.advisor

• Chaudhuri, Ananish
• Sundaram, Asha
• MacCulloch, Robert

• Inequality
• Social capital
• Online experiment
• Merit
• Luck
• Public Goods Game
• Prisoner's Dilemma
• Trust Game
• Stag-hunt Game
• Punishment
• Imperfect Monitoring

Statement dc:rights

• Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

Licence dc:rights.uri

• https://researchspace.auckland.ac.nz/docs/uoa-docs/rights.htm

Handle dc:identifier.uri

https://hdl.handle.net/2292/75615

OAI identifier oai:identifier

oai:researchspace.auckland.ac.nz:2292/75615