Short- and Long-run Effects of External Interventions on Trust

Abstract

We analyze experimentally the eects of external interventions such as subsidy and targeting on investment decisions, during an intervention and after. We employ a multi-period version of the trust (investment) game Berg et al. (1995) introducing either monetary incentives for contribution or providing a suggestion about the level of investment. The results of the experiment indicate that targeting is an effective instrument to promote trustful behavior while subsidy policy is eective in neither the short-or the long-run.Therefore, we suggest a targeting policy should be considered as an instrument to foster trustful behavior.