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The impact of two different economic systems on dishonesty

Article  in  European Journal of Political Economy · March 2019

DOI: 10.1016/j.ejpoleco.2019.02.010

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 European Journal of Political Economy xxx (xxxx) xxx

Contents lists available at ScienceDirect

European Journal of Political Economy

journal homepage: www.elsevier.com/locate/ejpe

The impact of two different economic systems on dishonesty

€dker c, Lars Hornuf d, e, f, *,
Dan Ariely a, Ximena Garcia-Rada b, Katrin Go
g
Heather Mann
a
Duke University, Durham, NC, USA
b
Harvard Business School, Boston, MA, USA
c
University of Hamburg, Department of Socioeconomics, Hamburg, Germany
d
University of Bremen, Faculty of Business Studies and Economics, Bremen, Germany
e
Max Planck Institute for Innovation and Competition, Munich, Germany
f
CESifo, Munich, Germany
g
Duke University, Department of Psychology, Durham, NC, USA

A R T I C L E I N F O A B S T R A C T

JEL classification: Using an artefactual field experiment, this paper tests the long-term implications of living in a
C93 specific economic system on individual dishonesty. By comparing cheating behaviour across in-
D63 dividuals from the former socialist East of Germany with those of the capitalist West of Germany,
P52
we examine behavioural differences within a single country. We find long-term implications of
Keywords: living in a specific economic system for individual dishonesty when social interactions are
Social behaviour
possible: participants with an East German background cheated significantly more on an abstract
Cheating
die-rolling task than those with a West German background, but only when exposed to the
Dishonesty
Artefactual field experiment enduring system of former West Germany. Moreover, our results indicate that the longer in-
dividuals had experienced socialist East Germany, the more likely they were to cheat on the
behavioural task.

1. Introduction

Individual dishonesty is very costly for society. For example, the average annual tax gap in the US for the years 2008 to 2010 is
estimated to be $458 billion (Internal Revenue Service, 2016). The costs of insurance fraud (excluding health insurance) is estimated to
be more than $40 billion per year, which translates to costs in the form of increased premiums between $400 and $700 per year for an
average US family (U.S. Department of Justice, 2018). Hence, understanding determinants of dishonest behaviour is a major concern for
society.
In this paper, we investigate a context effect of dishonesty by asking the following question: What are the long-term implications of
living in a specific economic system for individual dishonesty? We explore whether existing economic systems, socialism and capitalism,
have a different effect on people's dishonesty. To understand how exposure to economic systems influences individual behaviour, we use
a historical event, the division of Germany into two different formerly existing economic regimes within a single country, socialist East
and capitalist West Germany. Specifically, we compare cheating behaviour between East Germans, who were exposed to socialism for
over 40 years, and West Germans, who were at the same time living in a market economy. Several studies have documented differences
in individual behaviour between citizens of former East and West Germany, for example in national solidarity (Ockenfels and Weimann,

* Corresponding author. University of Bremen, Faculty of Business Studies and Economics, Bremen, Germany.
E-mail address: hornuf@uni-bremen.de (L. Hornuf).

https://doi.org/10.1016/j.ejpoleco.2019.02.010
Received 6 September 2018; Received in revised form 3 January 2019; Accepted 26 February 2019
Available online xxxx
0176-2680/© 2019 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.
org/licenses/by-nc-nd/4.0/).

Please cite this article as: Ariely, D. et al., The impact of two different economic systems on dishonesty, European Journal of Political
Economy, https://doi.org/10.1016/j.ejpoleco.2019.02.010
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

1999; Brosig-Koch et al., 2011) or preferences for redistribution and levels of social trust (Alesina and Fuchs-Schündeln, 2017; Heineck
and Süssmuth, 2013). Heineck and Süssmuth (2013) even find that specific cultural traits are passed down through generations. We add
to this strand of literature by investigating the persistence of behavioural differences in dishonesty. Moreover, we compare the impact of
two economic systems within one single country to better understand the effect of extant socialistic versus capitalistic regimes on in-
dividual dishonesty.
It is important to note that social interactions—between friends as well as strangers—influence dishonest behaviour. People cheat
more when they observe others behaving dishonestly (Gino et al., 2009). In this vein, Dieckmann et al. (2016) and Rauhut (2013) find
support for social conformity to the observed behaviour in the form of contagiousness and spread of norm violations. Mann et al. (2014)
also show a transmission through social networks and document that people's tendency to lie is associated with the lying behaviour of
their friends and family members. However, social interaction can also lead to anti-conformity in behaviour. An experimental study by
Fortin et al. (2007) finds evidence of a social anti-conformity effect, which suggests that individuals deviate from the tax compliance
behaviour of their reference group, using an income reporting task. In the specific case of former East and West Germany, fairness
considerations may spur social interaction effects, since fervent debate erupted after the reunification of Germany about whether
economic and social injustice befell parts of the country because of the reunion (Schmitt and Maes, 1998). Individuals who believe they
were treated unfairly in an interaction with another person are more likely to cheat in a subsequent unrelated game (Houser et al.,
2012). Moreover, when individuals are aware that they were poorly compensated relative to another group, they cheat more to increase
their earnings (John et al., 2014). In this paper, we explore whether social interactions might explain individual differences in
dishonesty between citizens from socialist versus capitalist systems.
We use an artefactual field experiment (Harrison and List, 2004) to investigate the impact of different economic systems within a
single country on individual cheating behaviour. We compare cheating among people exposed to the two existing economic systems of
former Germany. In particular, we compare Germans living in Berlin, where citizens with East and West German backgrounds co-exist,
with Germans living outside of Berlin, where citizens typically live with peers sharing the same historical background. To measure
cheating behaviour, we use a die task adapted from previous research where participants were paid based on the number of dots on
reported die rolls (Fischbacher and F€ ollmi-Heusi, 2013; Jiang, 2013; Mann et al., 2016; see Garbarino et al., 2016 and Abeler et al., 2018
for two meta-analyses). It has been shown that even abstract cheating tasks predict behaviour in the field. For example, a widely used
reporting task in the lab significantly predicts classroom misbehavior in middle and high school students (Cohn and Marechal, 2018)
and it has been shown that abstract as well as contextualized cheating tasks in the laboratory correlate with rule violations in real life
(Dai et al., 2017).
Our results show that social interaction is an important mechanism underlying individual cheating: participants with an East German
background cheated significantly more on an abstract die-rolling task than those with a West German background, but only when
exposed to the enduring capitalist system of West Germany. Moreover, our results indicate that the longer individuals living in Berlin
had experienced socialist East Germany, the more likely they were to cheat on the behavioural task. In contrast, we did not observe
differences in cheating behaviour between East and West German individuals living in the respective cities of Leipzig (East Germany)
and Dortmund (West Germany). Unlike in Berlin, individuals from Leipzig and Dortmund have less opportunity for comparison against
the alternative economic system, due to being situated at some distance from the former inner German border.
The remainder of the paper is structured as follows. Section 2 outlines related literature on differences between former East and West
Germany. Thereafter, section 3 presents our materials and methods. Section 4 lays out the empirical results of our study. Section 5
concludes.

2. Differences between former East and West Germany

From 1961 to 1989, the Berlin Wall divided one nation into two distinct economic and political regimes: socialism (East Germany)
and capitalism (West Germany). Socialist systems have been characterized by extensive scarcity, which in the case of East Germany,
ultimately led to the collapse of the German Democratic Republic (GDR). In many instances, socialism pressured or forced people to
work around official laws. For example, in East Germany stealing a load of building materials in order to trade it for a television set might
have been the only way for a person to acquire a valuable good and connect to the outside world (Hornuf and Rieger, 2017). Moreover, a
high degree of infiltration by intelligence apparatuses is also considered as a key characteristic of socialist systems. In East Germany, the
secret service (Staatssicherheit) kept records on more than one third of its citizens (Koehler, 1999). Moreover, freedom of speech was not
a virtue upheld in socialist regimes and citizens had to often misrepresent their thoughts to avoid repression.
Earlier studies have shown differing degrees of national solidarity between East and West Germans. In a laboratory experiment with
economics students, East Germans showed significantly less solidarity five years after the German reunification (Ockenfels and Wei-
mann, 1999). When asked how much money they would be willing to hand over to anonymous future losers if they won 10 Deutsche
Mark in a solidarity game, East Germans were willing to give up roughly half as much as West Germans. Interestingly, East Germans also
expected to receive much less from potential winners. These results were recently confirmed by another study showing that there was no
convergence in solidarity 20 years after the German reunification, which the authors attribute to slow changes in social behaviour due to
the necessity of coordination on social norms in the society as well as complementarities involved in individual social behaviour
(Brosig-Koch et al., 2011).
Based on data from the German Socioeconomic Panel (SOEP), Alesina and Fuchs-Schündeln (2007) provide evidence that East
Germans have stronger preferences for public policies that involve redistribution. They find that economic and political regimes greatly
shape individual preferences for state interventions and that these preferences change slowly. According to the authors' analysis, one
fourth of the effect that East Germans' have stronger preferences for state intervention is because East Germans became poorer during

2
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

the socialist epoch, while the remainder can be attributed to the impact of socialism on individual preferences itself. Yet, one limitation
of the study is that people might distort their true preferences when responding to a survey like SOEP. For example, people might
overstate their willingness to contribute to redistributive policies because they do not actually have to pay for them. Using a discrete
choice experiment, another study shows that the stated preferences of East Germans towards redistribution indeed differ from their
actual preferences (Pfarr et al., 2013). While East Germans indicate that they prefer higher degrees of redistribution, they are not
actually willing to pay for such policies.
Relatedly, Heineck and Süssmuth (2013) investigate the effect of the economic regime on individuals' trust, risk preferences, and
cooperativeness using SOEP data. Relative to West Germans, East Germans showed persistently lower levels of social trust and were less
inclined to see others as fair. This study also suggested that East Germans are more risk-loving. Most importantly, the authors find that
these cultural traits appear to be passed down through generations. While this research provides valuable insights on differences in
solidarity and individual social preferences, little is known about how the economic systems of former East and West Germany influ-
enced individual dishonesty. Torgler (2003) indicates that at one point in time, East Germans were more likely to say that cheating on
their taxes cannot be justified than West Germans, but this difference disappeared seven years after the German reunification. However,
this finding is based on self-stated preferences in a survey and therefore might not reflect individuals' actual behaviour when they are in
a position where dishonesty financially pays off.

3. Materials and methods

3.1. Experimental setup

We conducted two experimental sessions in three German cities. The sessions differ in the cities of data collection only. Study
materials and tasks were identical for both sessions. For session 1, we collected data in Berlin over the course of five days (from
December 2nd, 2013 through December 6th, 2013). For session 2, we collected data over two days in Leipzig, East Germany (from
March 13th to March 14th, 2015) and two days in Dortmund, West Germany (from September 9th to September 10th, 2015). The
varying timeframes of data collection results from the obtainment of permission from the citizen centres and city administration, co-
ordination of experimenters, and arrangement of the experimental setup and procedures at the citizen centres.
We vary the cities of data collection to explore the effect of social interaction between East and West German backgrounds on
dishonest behaviour. We argue that individuals living in Berlin are closely exposed to the former other system (capitalism versus

Fig. 1. Data collection in two economic systems. Red areas represent former East Germany and blue areas represent former West Germany.
Dortmund, Leipzig, and Berlin (Zehlendorf, Steglitz, Neuk€olln, Mitte, Weissensee and Pankow) mark the regions where we conducted the experiment.
(For interpretation of the references to colour in this figure legend, the reader is referred to the web version of this article.)

3
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

socialism), because Berlin itself was divided into a capitalist West and a socialist East, whereas those living in other average cities in
Germany (Dortmund or Leipzig) are not so apt to exposure to the other economic system. Thus, we predict to find a significant difference
in cheating behaviour when comparing former East versus West Germans in Berlin but not in Dortmund or Leipzig, i.e., we predicted an
interaction between economic system exposed to (former East vs. former West) and location (Berlin vs. Dortmund/Leipzig).
In session 1, we collected data in six different administrative regions in Berlin, including regions directly at the former border of the
Berlin Wall (Neuk€ olln, Mitte and Pankow) and regions in former East and West Berlin hinterlands (Zehlendorf, Steglitz and Weissensee).
The sample size of session 1 was 259 participants. In session 2, we collected data in four different administrative regions in Leipzig
(Gohlis-Centre, Leipzig Mitte, Paunsdorf-Centre and Ratzelbogen), a city in former East Germany as well as two different administrative
regions in Dortmund (H€ orde and Innenstadt), a city in former West Germany (Fig. 1). Both cities were chosen because they are similar in
terms of size and average income of the citizens.1 The sample size of session 2 was 275 participants (139 in Leipzig and 136 in
Dortmund).

3.2. Participants

According to Article 1 of the German ID Card Law (Personalausweisgesetz), every German is required to possess and show upon
request a passport or ID card from the age of sixteen. Passports and ID cards are valid for up to 10 years and thereafter need to be
renewed. A fine of up to 5000 EUR can be imposed in cases of non-compliance. Hence, even Germans who do not need a passport or ID
card for travel purposes have a strong incentive to possess at least one of the two documents. Furthermore, when a passport or ID card is
ordered, the applicants must collect it themselves. A proxy person can collect the documents only in narrowly defined exceptional cases.
This set of requirements gives us confidence that the people collecting their passport or ID card at the citizen centre represent a random
sample of the population in the respective cities.2 The average age of our participants is 37.8 years with a standard deviation of 14.1
years; 48 percent are female.3 For further descriptive statistics, see Appendix A Table A.1.

3.3. Experimental protocol

The experimental design and procedures were identical for both sessions; additionally, the same two experimenters, one male and
one female with East and West German family background respectively, collected the data in the three cities in Germany. Experimenters
operated independently and approached participants as they came in the citizen centre waiting rooms and sat down (see Appendix B
Figs. 1–2 for photographs of two locations of the experiment). An experimenter then briefly described the study and asked the
participant whether they would be interested in participating. If a potential participant verbally consented to take part in the study, the
experimenter continued with the protocol; otherwise the person was thanked and the experimenter moved on to the next person. The
study in both sessions 1 and 2 included three consecutive parts in the following order: 1) a behavioural cheating task, 2) a questionnaire
including measures of participants' family background (East or West German) as well as demographics and control questions, and 3) an
opportunity to anonymously donate the earnings.

3.4. The die task

To measure cheating behaviour, we used a behavioural task adapted from Jiang (2013) and Mann et al. (2016) where participants
were paid based on the number of dots on reported die rolls (see Appendix C for die task instructions). Participants threw a six-sided die
40 times, and at the end of the task, their payoff was determined by the random selection of one of their rolls (the experimenter
randomly drew a number from 1 to 40 out of an envelope). Before each roll, participants were instructed to either decide on the top or
bottom side of the die in their mind, and to memorize their decision before rolling the die. They then threw a physical die, observed the
outcome, and recorded their outcome on a piece of paper. Participants completed the task privately and earned 1 EUR for each dot on
that particular roll.
In this task, participants could cheat in two possible ways every time they threw the die: first, by claiming that they chose the side of
the die that leads to the higher payoff when in fact they chose the lower-paying side (done so by reporting the side of the die with more
dots, which would lead to a higher payoff); and second, by simply making up a roll. If participants were completely honest, we would
expect an average payoff of 3.50 EUR, equivalent to selecting the high-paying side 50 percent of the time. Thus, we can observe the first
dimension of cheating by examining the percentage of high-paying rolls, which should be 50 percent in a completely honest population.
In addition, we can identify the second dimension of cheating by examining the distribution of the combined numbers of rolls with 3 or 4
dots, rolls with 2 or 5 dots, and rolls with 1 or 6 dots, which should be equally distributed in a completely honest population. If, for
example, the combined rolls of 6 and 1 are reported more often than the combined rolls of 5 and 2 or 4 and 3, this can be attributed to
participants falsifying rolls (presumably making up rolls with 6 dots).

1
Information published in the German Statistical Yearbook 2015 and the National Accounts of the German Federal Statistical Office: 551,871
inhabitants in Leipzig and 589,283 inhabitants in Dortmund as of December 2014; disposable household income in 2013 of 8801€ in Leipzig and
10,325€ in Dortmund.
2
The acceptance rate to take part in the study was between 25 percent to 50 percent mostly depending on the time of the day and how long people
had to wait in the citizen centre.
3
The age of our participants ranged from 12 to 87 years. Two participants at the age of 12 conducted the experiment jointly with their parents.

4
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

3.5. Questionnaire

In both sessions, we measure the family background of each participant using a survey (see Appendix D and E). To assess participants'
background, we collected five different measures in our questionnaire: participants' family background (primary variable of interest) as
well as place of birth, place of living in the 1980s, place of living in the 1990s, and participants' self-appraised categorization of their
social background as secondary background variables. Experimenters were blind with regard to the social background of the partici-
pants. Additionally, two participants refused to complete the questionnaire after they took part in the die-rolling task and were therefore
excluded from the sample.

4. Results

In the analyses reported below, our independent variables are 1) the economic system participants were exposed to, which is
operationalized by their family background (East German versus West German), and 2) participants' location (session 1 versus session
2). In our survey, we included five measures to capture participants' backgrounds, and report results using these five measures in
Appendix A Table A.2. However, for our main results reported below, we consider family background as our primary measure of East or
West background.
Our statistical approach combines differences in means tests and multivariate Probit regression models to examine the effect of the
two economic systems on cheating behaviour. As a robustness check, we investigate participants' length of exposure to a particular
economic system. Besides using common control variables (age, gender, education, political orientation, living standard and marital
status), we also included controls capturing trust and fairness considerations because prior work has shown that socialism in East
Germany led to lower levels of trust (Heineck and Süssmuth, 2013). As participants' trust might impact individual honesty behaviour
(Dieckmann et al., 2016), we adapted a question from the World Value Survey (Inglehart and Welzel, 2012) and asked them how much
they would trust East and West Germans respectively. We also included a dummy variable inquiring whether participants believed that
East Germans have been betrayed by West Germans after the reunification of Germany, since Houser et al. (2012) showed that being
treated unfairly by others influences individual cheating behaviour.

4.1. Cheating behaviour

Our results reveal that on average, both groups cheated on the first dimension by selecting the high-paying side of a die roll
significantly more often than would be expected by chance. Across both sessions, participants with a West German family background
reported 55 percent high rolls on average (mean roll ¼ 3.68), and participants with an East German family background reported 58
percent high rolls on average (mean roll ¼ 3.77). Both statistics significantly differ from the pure chance outcome of a fair die of 50
percent high rolls on average (mean roll ¼ 3.50) on a simple t-test, hence reflecting some level of dishonesty in each group (p < 0.001).
Beyond that, t-test as well as Wilcoxon-Mann-Whitney-test statistics reveal that Germans with an East German family background
cheated more than those participants with a West German family background. The difference is, however, marginally significant
(p ¼ 0.069, Prob > jzj ¼ 0.099). See Appendix A Table A.2. for detailed statistics.4
Comparing results from session 1 and 2 reveals that the behavioural difference between the two groups only holds for participants
living in Berlin, as they chose the high-paying sides on 60 percent of rolls (East German family background) versus on 55 percent of rolls
(West German family background) respectively (Fig. 2). The difference in cheating for the Berlin sample (session 1) is statistically
significant at conventional levels (p ¼ 0.013, Prob > jzj ¼ 0.011). In contrast, participants from Leipzig and Dortmund (session 2) show
no significant differences in levels of cheating between East and West German family backgrounds.
Next, we assessed whether participants cheated on the second dimension by simply making up rolls. The observed distribution of
rolls in our sample suggests that participants invented rolls: rolls with 3 or 4 dots combined appeared less frequently than rolls with 1 or
6 dots combined. However, this effect is only marginally significant (p ¼ 0.053) (see Appendix F Figure F.1.D). Finally, participants with
East and West German backgrounds do not differ regarding this second dimension of cheating across the two sessions.
We ran Probit regressions with high or low-paying rolls as the dependent variable and used the random effects panel estimator to
account for clustering of specific effects within individuals. In order to identify the effect of the participant's background and location on
cheating behaviour, we included a dummy variable for family background (dummy ¼ 1 if the participant has an East German family
background, 0 otherwise), a dummy variable for the location, i.e., session 1 versus session 2 (dummy ¼ 1 if location is Berlin,
0 otherwise), and an interaction term of the two dummy variables (interaction term ¼ 1 if the participant has an East German family
background and the experiment was conducted in Berlin, 0 otherwise). Thus, the interaction term identifies the additional effects of
having an East German background and being exposed to the citizens of former West Berlin – while controlling for the particular
characteristics of participants who have an East German family background or those living in Berlin. Examining our model's variables,
we find that most of the explanatory variables are only weakly correlated. Consequently, multicollinearity does not appear to be a matter
of concern for this study (see Appendix A Table A.3). Table 1 reports the results of our Probit regressions. Allowing for a more intuitive
interpretation, we report average marginal effects of the explanatory variables. The baseline estimates reveal that, when controlling for
other potential predictors of cheating, family background or living in Berlin per se does not change the probability of participants

4
When we treat the rolls of participants as statistically independent and run a χ2 test, we find East Germans to cheat more for all measures except
“How do you consider yourself?”.

5
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Fig. 2. Percentage of high rolls by East and West German family background. Percentage of high rolls by family background and region where
the experiment was conducted. Error bars represent standard error of the mean (SEM). * indicate significance at the 5% level.

reporting the high side of the die. However, the interaction term of having an East German background and living in Berlin is significant
(p ¼ 0.020), indicating an increase in participants' probability of cheating by 8.1 percent. This effect is stronger for participants with an
East German family background that were also born in and currently live in East Germany (column 2). The probability of cheating
increases by 9.5 percent (p ¼ 0.018).
With regard to our control variables, we find that age has a significant impact on cheating, contributing to the mixed findings on the
relationship between age and cheating in existing literature (Crown and Spiller, 1998). Being an additional year older increases the
probability of participants reporting the high side by 0.2 percent (p < 0.003). In line with Hartshorne et al. (1929), we find higher levels
of education reduce the probability of cheating. In addition, the results show that the belief that East Germans have been betrayed by
West Germans after the reunification of Germany significantly reduces the probability of cheating (p ¼ 0.027). However, West Germans,
who believe that East Germans were betrayed after the reunification, drive this effect. Participants' marital status has a marginally
significant effect, which indicates that married participants tend to cheat less. None of the other explanatory variables have a statistically
significant effect on cheating. Notably, our two control variables capturing participants' trust in East and West Germans have no sig-
nificant impact on cheating. The finding that there are no gender differences in cheating contrasts somewhat with Muehlheusser et al.
(2015), but is in line with more recent research by Ezquerra et al. (2018).
In addition, we consider that participants might change their cheating behaviour over time as they roll the die over and over.
Conceivably, the higher level of cheating observed for East German participants could be a consequence of adapting to the task and
cheating more over time, even if their initial dishonesty was identical to participants with a West German background. Thus, we start by
visually investigating the development of roll outcomes over time and across participants for each of the 40 rolls (see Appendix F
Figure F.2.A – C). Testing for autocorrelation does not yield any significant results. When we split the sample in half, participants'
cheating levels in the first half (roll 1 to 20) and second half (roll 21 to 40) of the task are also not significantly different (p ¼ 0.284).

4.2. Cheating behaviour by age cohorts

Next, we examine participants' length of exposure to their respective economic system and assess whether this strengthens differ-
ences in cheating behaviour. If economic systems have an effect on individuals' cheating, we would expect people who have had longer
exposure to socialism in East Germany to cheat even more compared to participants with a West German background. In order to capture
this degree of exposure, we analysed subsamples of Germans who were born before the dissolution of the GDR, who were at least 10
years old at the time of the reunification (born before 1980), and who were at least 20 years old when the Berlin Wall came down (born
before 1970) (see Table 1, column 3–5). We investigated the exposure to socialism by examining these distinct age cohorts separately.
The results show that differences in cheating levels for older age cohorts are greater between participants with an East and West German
background living close to the former border (session 1). Participants born before the dissolution of the GDR were 12.6 percent more
likely to cheat (p < 0.002), whereas participants who lived at least 10 years in a socialist society were 17.1 percent more likely
(p < 0.003), and participants who lived for 20 years or more under socialism were 20.7 percent more likely (p < 0.007) to cheat than
those participants of West Germany from the same age cohort from session 1 (i.e., location Berlin). Thus, the length of exposure to the
economic system strengthens the difference in cheating behaviour. However, this is again only true for participants in Berlin who have
the opportunity for directly experiencing both economic systems.5

5. Discussion

5.1. Berlin characteristics

The documented difference in cheating for the Berlin sample could be driven by specific characteristics of Berlin citizens. However,

5
The results in Table 1 are robust in terms of effect size and statistical significance when estimating a linear model.

6
 D. Ariely et al.
Table 1
Regression results for cheating behaviour.
Dependent variable High roll High roll High roll High roll High roll

(full sample) (East background and birth and living) (born before 1989) (born before 1980) (born before 1970)

Marginal effect p-value Marginal effect p-value Marginal effect p-value Marginal effect p-value Marginal effect p-value

East German 0.017 0.508 0.033 0.235 0.055y 0.068 0.084* 0.043 0.083 0.120
Location Berlin 0.024 0.346 0.050y 0.093 0.044 0.136 0.064 0.153 0.082 0.161
East German * Location Berlin 0.081* 0.020 0.095* 0.018 0.126** 0.002 0.171** 0.003 0.207** 0.007
Age 0.002** 0.001 0.002** 0.002 0.002** 0.002 0.003** 0.009 0.002 0.356
Female 0.013 0.449 0.021 0.275 0.004 0.849 0.005 0.862 0.006 0.885
Trust East 0.002 0.721 0.003 0.649 0.001 0.849 0.003 0.665 0.007 0.463
Trust West 0.005 0.261 0.002 0.703 0.002 0.694 0.001 0.933 0.007 0.465
West betrayed 0.044* 0.027 0.044y 0.051 0.055* 0.013 0.061* 0.044 0.085* 0.023
7

Education 0.016* 0.011 0.016* 0.031 0.019** 0.006 0.027** 0.004 0.011 0.394
Political orientation 0.002 0.627 0.003 0.502 0.005 0.335 0.000 0.992 0.007 0.448
Living standard 0.010 0.323 0.008 0.469 0.009 0.454 0.018 0.287 0.021 0.287
Marital status 0.036y 0.056 0.034 0.102 0.041y 0.051 0.069* 0.025 0.069y 0.097
N (participants) 341 266 276 167 100
N (rolls) 13,640 10,640 11,040 6680 4000
χ2 30.522 21.860 32.429 27.734 19.301
̅
This table shows results of Probit regressions with participant random effects. The dependent variables captures whether participants report the high paying side of the die or not. For variable definitions,
see Appendix E Table E.1. The table shows results for the baseline regression (1), a model analysing participants with an East German family background that were also born in and currently live in East

European Journal of Political Economy xxx (xxxx) xxx

Germany (2), as well as regressions for age cohorts (3)–(4). Regression models report average marginal effects and p-values. **,* and y indicate significance at the 1%, 5% and 10% level.
D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Table 2
Participants' living history in the Berlin sample.
Berlin sample

Freq. Percent Cum.

Place of birth
East Berlin 39 15.29 15.29
West Berlin 69 27.06 42.35
East Germany 58 22.75 65.10
West Germany 65 25.49 90.59
Others 24 9.41 100.00
Total 255 100.00
Living in the 1980s
East Berlin 48 22.97 22.97
West Berlin 60 28.71 51.67
East Germany 40 19.14 70.81
West Germany 48 22.97 93.78
Others 13 6.22 100.00
Total 209 100.00
Living in the 1990s
East Berlin 64 25.40 25.40
West Berlin 82 32.54 57.94
East Germany 34 13.49 71.43
West Germany 58 23.02 94.44
Others 14 5.56 100.00
Total 252 100.00

three arguments underline that the observed effect in our Berlin sample should not be related to specific unobserved characteristics of
this group. First, Table 2 shows that almost half of the Berlin participants also lived, or were born, in other cities across Germany,
ensuring that the effect is not only driven by specific factors related to being a native of Berlin. Second, our age cohort effect supports the
notion that the observed behavioural difference is determined by variables related to living in East Germany over a long time and not
being a native of Berlin per se. Third, we show that people with a West Berlin background have very similar cheating levels to those
living in Dortmund or Leipzig, indicating that participants living in West Berlin are after all not that different from other participant
cohorts.

5.2. Selection effects

Given that almost half of the Berlin participants come from other regions in Germany, another alternative explanation of the
observed effect might be that people who moved to Berlin are special. After the reunification, the former West German capital of Bonn
moved to Berlin, resulting in many public officials relocating to Berlin in 1999. As of 2015, about 11,301 out of 17,997 government
employees work in Berlin.6 However, assuming all currently employed officials moved from Bonn to Berlin, the probability of including
such an official in our sample is only 0.0032 percent. Calculations are based on data of the German Federal Statistical Office. As of
December 31st, 2015, the total population of Berlin amounts to 3,520,031. Our effect for the Berlin sample is clearly not driven by any
one participant.7 Nevertheless, people moving to Berlin might generally be special and the observed effect could mainly be driven by
those East German citizens who moved to Berlin. However, Fig. 3 reveals that the East Germans who moved to Berlin still cheat more,
but not (yet) as much as natives of East Berlin, who faced a relatively longer period of exposure to both systems. Thus, we argue that our
effect is not driven by the selection of a particular group of East Germans moving to East Berlin.

6. Conclusion

From 1961 to 1989, the Berlin Wall divided one nation into two distinct regimes. We exploited this fact to investigate whether the
economic context impacts individual dishonesty by running an artefactual field experiment. Using an abstract die-rolling task, we find
evidence that when social interaction is likely, East Germans exposed to socialism cheat more than West Germans exposed to capitalism.
In contrast, when the other economic system is less salient, East Germans and West Germans do not differ in terms of cheating behaviour.
Furthermore, we find that the observed difference in cheating behaviour is stronger for older age cohorts, indicating that the longer
participants were exposed to socialism in East Germany, the greater is their dishonesty. Thus, we provide evidence for long-term im-
plications of living in a specific economic system for individual dishonesty when social interactions are innate.
Our findings add a new perspective to dishonesty. Previous work provided 658 Germans with an opportunity to earn 15 EUR by
misreporting the side of a coin toss on the telephone (Abeler et al., 2014). While the results of this study did not reveal differences in

6
See BT-printed matter 18/7274 of the German parliament, page 9–10.
7
0.0032 percent x 252 participants ¼ 0.81 participant ~1 participant.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Fig. 3. Percentage of high rolls by place of birth for Berlin sample. Percentage of high rolls by place of birth for participants from Berlin sample.
Error bars represent standard error of the mean (SEM). * indicate significance at the 5% level.

cheating behaviour, we show that differences in dishonesty exist between different groups within the country. This is in line with the
finding that morality differs more between social groups within one country than between different countries (Mann et al., 2016; Haidt
et al., 1993; for differences in unethical behaviour between countries see G€achter and Schulz, 2016 as well as Shalvi, 2016). More
generally, considering the findings by Falk and Szech (2013), which indicate that markets decay morals, our results potentially provide a
first hint that other economic systems, such as socialism, may have an even more detrimental effect on individuals' morality. Future
studies might investigate the specific factors that might affect morality in capitalist versus socialist as well as democratic versus
authoritarian societies.
Behavioural variation across different populations or groups can be driven by many different factors, such as markets, institutions, or
norms. In contrast to much existing cross-cultural research, we investigate the impact of economic systems on social behaviour within
one single country, which makes our results more robust with regard to unobservable heterogeneity across the sample. Moreover, we use
a non-student sample, taking into account that behavioural differences among student populations are not representative and are rather
small compared to the range of existing economic environments. For future work, it would be interesting to examine the observed effect
of social interaction, isolating what drives the variation in behavioural differences across different economic systems and whether it can
be found in other types of prosocial and antisocial behaviour. Laboratory experiments validating this finding from the field seem to be
promising.

Appendix A. Sample statistics

Table A.1
Descriptive statistics for the full sample and subsamples regarding family background. See variables description in Appendix E.

Full sample Family background

East German West German German Others N/A

mean median SD min max mean mean mean mean mean

Average roll 3.74 3.68 0.47 2.28 5.85 3.77 3.68 3.73 3.82 3.64
High rolls (%) 0.57 0.55 0.14 0.28 1.00 0.58 0.55 0.57 0.59 0.55
Earnings 3.67 4.00 1.71 1 6 3.64 3.61 3.61 4.04 3.00
Age 37.77 34.00 14.11 12 87 41.14 36.63 35.81 33.17 58.00
Female 0.48 0.00 0.50 0 1 0.49 0.42 0.47 0.61 0.33
Education 3.39 3.00 1.42 0 6 3.41 3.58 2.94 3.24 2.00
Living standard 2.74 2.00 1.03 1 7 2.77 2.66 2.97 2.59 3.00
Political orientation 3.89 4.00 2.03 0 10 3.87 3.79 4.40 3.73 3.00
Trust East 2.61 2.00 2.42 0 10 2.70 2.24 2.43 3.67 2.00
Trust West 3.10 2.50 2.55 0 10 3.80 2.34 2.78 3.69 2.00
West betrayed 0.30 0.00 0.46 0 1 0.26 0.36 0.25 0.27 0.00
N 534 189 195 75 70 5

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Table A.2
Participants' reported share of high rolls by background. Reported share of high rolls for different measures of East and West German background. **,*
and y indicate significance at the 1%, 5% and 10% level.
N High rolls (%) SD Differences between East and West background

t-test Wilcoxon-Mann-Whitney-test

Panel A: Full sample

Family background
East German 189 0.58 0.15 0.03y
West German 195 0.55 0.13 (p ¼ 0.069) Prob > jzj ¼ 0.099
German 75 0.57 0.14
Others 70 0.59 0.16
N/A 5 0.55 0.12
Consider yourself
East German 73 0.59 0.14 0.01
West German 70 0.58 0.15 (p ¼ 0.656) Prob > jzj ¼ 0.416
German 298 0.56 0.15
Others 85 0.58 0.15
N/A 8 0.50 0.11
Place of birth
East Germany 215 0.58 0.15 0.02
West Germany 265 0.56 0.14 (p ¼ 0.248) Prob > jzj ¼ 0.222
N/A 54 0.55 0.13
Living in the 1980s
East Germany 191 0.58 0.16 0.02
West Germany 202 0.56 0.14 (p ¼ 0.115) Prob > jzj ¼ 0.291
Others 25 0.55 0.12
N/A 116 0.57 0.14
Living in the 1990s
East Germany 211 0.58 0.16 0.03*
West Germany 279 0.55 0.13 (p ¼ 0.044) Prob > jzj ¼ 0.152
N/A 44 0.58 0.15

Berlin sample (N ¼ 259) Leipzig & Dortmund samples (N ¼ 275)

N High rolls (%) SD Differences between East N High rolls (%) SD Differences between East
and West background and West background

t-test Wilcoxon-Mann t-test Wilcoxon-Mann

-Whitney-test -Whitney-test

Panel B: East and West Berlin, Leipzig and Dortmund samples

Family background
East German 90 0.60 0.15 0.05* 99 0.56 0.15 0.00
West German 98 0.55 0.13 (p ¼ 0.013) Prob > jzj ¼ 0.011 97 0.55 0.14 (p ¼ 0.850) Prob > jzj ¼ 0.881
German 37 0.52 0.13 38 0.61 0.13
Others 30 0.60 0.16 40 0.58 0.15
N/A 4 0.53 0.12 1 0.63 –
Consider yourself
East German 33 0.60 0.12 0.02 40 0.58 0.15 0.00
West German 40 0.58 0.14 (p ¼ 0.510) Prob > jzj ¼ 0.229 30 0.57 0.16 (p ¼ 0.902) Prob > jzj ¼ 0.877
German 141 0.56 0.15 157 0.56 0.14
Others 40 0.56 0.13 45 0.60 0.16
N/A 5 0.52 0.11 3 0.48 0.13
Place of birth
East Germany 97 0.59 0.15 0.03 118 0.57 0.15 0.00
West Germany 134 0.56 0.14 (p ¼ 0.118) Prob > jzj ¼ 0.060 131 0.57 0.15 (p ¼ 0.889) Prob > jzj ¼ 0.934
N/A 28 0.54 0.14 26 0.56 0.12
Living in the 1980s
East Germany 88 0.59 0.16 0.03y 103 0.57 0.16 0.01
West Germany 108 0.56 0.14 (p ¼ 0.095) Prob > jzj ¼ 0.132 94 0.56 0.14 (p ¼ 0.528) Prob > jzj ¼ 0.953
Others 13 0.52 0.10 12 0.58 0.13
N/A 50 0.56 0.15 66 0.57 0.13
Living in the 1990s
East Germany 98 0.59 0.16 0.04y Prob > jzj ¼ 0.130 113 0.57 0.16 0.02
West Germany 140 0.55 0.13 (p ¼ 0.058) 139 0.56 0.13 (p ¼ 0.329) Prob > jzj ¼ 0.578
N/A 21 0.56 0.14 23 0.60 0.16

Reported share of high rolls for different measures of East and West German background and for East and West Berlin as well as Leipzig and Dortmund
subsamples. **,* and y indicate significance at the 1%, 5% and 10% level.

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 D. Ariely et al.
Table A.3
Correlation matrix showing pairwise correlations between variables. For variable definitions, see Appendix E.
[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13]

[1] High rolls % 1.0000

[2] Donations % 0.1708 1.0000
[3] East German 0.0928 0.0232 1.0000
[4] Location Berlin 0.0004 0.0166 0.0264 1.0000
[5] Age 0.0701 0.0577 0.1612 0.0029 1.0000
[6] Female 0.0768 0.0033 0.0718 0.0767 0.0578 1.0000
11

[7] Trust East 0.0524 0.0095 0.0976 0.0123 0.0447 0.0046 1.0000
[8] Trust West 0.0778 0.0379 0.2862 0.0128 0.1189 0.0388 0.6604 1.0000
[9] West betrayed 0.0518 0.0132 0.1018 0.2186 0.2240 0.1354 0.0391 0.0051 1.0000
[10] Education 0.1072 0.0062 0.0618 0.0397 0.0950 0.0399 0.1653 0.1735 0.0407 1.0000
[11] Political orientation 0.0272 0.0764 0.0205 0.0899 0.0358 0.1576 0.1139 0.1571 0.0138 0.0408 1.0000
[12] Living standard 0.0370 0.1102 0.0564 0.0916 0.0606 0.0252 0.0696 0.1564 0.0183 0.1972 0.0734 1.0000
[13] Marital status 0.0443 0.0591 0.1696 0.0523 0.4738 0.0486 0.0076 0.0435 0.1749 0.0078 0.0473 0.0506 1.0000

European Journal of Political Economy xxx (xxxx) xxx

D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Appendix B. Exemplary locations field experiment

Fig. 1. Citizen centre East Berlin.

Fig. 2. Citizen centre West Berlin.

Appendix C. Cheating Die Task Instructions

In this task, you are asked to throw a die 40 times. Every time before you roll the die, you will be asked to choose one side of the die in
your mind: top or bottom. Be sure to make your choice before you roll the die. Then, after rolling the die, please enter the outcome of
your roll in this sheet, i.e. the number of dots shown on the chosen side of the die (top or bottom).
Bear in mind that for each roll there are two possible sides: top or bottom. Here, the figure shows the different outcome
combinations.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Please return your record sheet to the experimenter after you threw the die 40 times. The experimenter will then randomly draw a
number from 1 to 40. This number determines which of your rolls is relevant for your payment.
You will get paid 1€ for each dot of this randomly drawn roll. For example, assume the experimenter draws number 14, then your
14th roll determines your payment. The experimenter will check your record sheet and pay you 1€ for each dot of your 14th roll.
Please discuss any questions with the experimenter before starting the task!
Instructions (donation).
The hospital of Hannover [Leipzig, Rostock] located in West Germany [East Germany] is a public institution that stands for local
medicine and care, high quality treatment, as well as sophisticated diagnostics and therapy. Given its traditional duty, the hospital
regards itself as an institution that constitutes a medical-social centre. In addition to offering medical care, being close to people is also at
the core of the hospital's work. The clinic therefore also administers social services especially for West German [East German] patients
and relatives and is currently expanding this service. To continue with that work, the hospital of Hannover [Leipzig, Rostock] depends
not only on public funding but also on public donations. Please donate for the patients and relatives in West Germany [East Germany].

Appendix D. Supplementary data

Supplementary data to this article can be found online at https://doi.org/10.1016/j.ejpoleco.2019.02.010

Appendix E

Table E.1
Variable descriptions.

Variable Description

Earnings Participants' earnings from the die task in Euro (1 EUR, 2 EUR, 3 EUR, 4 EUR, 5 EUR, or 6 EUR).
High roll 0 ¼ Participant reported that they had rolled a 1, 2, or 3.
1 ¼ Participant reported that they had rolled a 4, 5, or 6.
High rolls in % Participants' share of reported high rolls over the 40 rolls.
East German 0 ¼ Participant indicated to have a West German family background
1 ¼ Participant indicated to have an East German family background.
Location Berlin 0 ¼ Experiment was run in Leipzig (East Germany) or Dortmund (West Germany).
1 ¼ Experiment was run in East or West Berlin.
Age Participants age as of January 1, 2015.
Female What is your gender? 0 ¼ male, 1 ¼ female.
Education What is the highest level of education you have completed?
Scale: 0 ¼ none, 1 ¼ ‘Hauptschule’ (lower level high school), 2 ¼ ‘Realschule’ (high school), 3 ¼ ‘Abitur/Fachabitur’
(some college), 4 ¼ ‘Bachelor/Fachhochschulabschluss’ (3–4 years of university), 5 ¼ ‘Maste/Diplom’
(4–5 years of university) and 6 ¼ ‘Promotion/Aufbaustudium’ (doctoral degree, post-graduate degree).
Living standard What describes your standard of living? Scale from 1 ¼ very well off to 6 ¼ poor.
Marital status 0 ¼ Participant reported to be single, separated, divorced, widowed or indicated ‘other’.
1 ¼ Participant reported to be in a relationship or married.
Political orientation In political matters, people talk of “the left” and “the right”. How would you place your views on this scale,
generally speaking? Scale from 0 ¼ left to 10 ¼ right.
Trust East Generally speaking, would you say that East Germans can be trusted? Scale from 0 ¼ most East Germans
can be trusted to 10 ¼ you cannot be too careful in dealing with East Germans.
Trust West Generally speaking, would you say that West Germans can be trusted? Scale from 0 ¼ most West Germans can be
trusted to 10 ¼ you cannot be too careful in dealing with West Germans.
West betrayed Would you agree that West Germans cheated East Germans after the fall of the Berlin Wall? 0 ¼ no, 1 ¼ yes.

Appendix F. Reported rolls

Figure F.1. Reported roles by East and West German family background.
Percentages of reported rolls of 1, 2, 3, 4, 5 and 6. The red line refers to the fair outcome of 16.6 percent and 33.3 percent,
respectively. All rolls for East and West Germans (as well as both groups combined) are statistically different from the 16.6 percent
baseline for outcomes 1, 2, 3, 4, 5 and 6 at the p < 0.05 level.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Fig. F.1.A. Full sample.

Fig. F.1.B. Berlin sample.

Fig. F.1.C. Leipzig and Dortmund sample.

Percentages of reported rolls of 3–4, 2–5 and 1–6 combinations. None of the two-side combinations for East and West Germans (as
well as both groups combined) are statistically different from the 33.3 percent baseline at the p < 0.05 level.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Fig. F.1.D. Full sample.

Fig. F.1.E. Berlin sample.

Fig. F.1.F. Leipzig and Dortmund sample

Figure F.2. Percentage of high rolls by stage of experiment, family background and location where experiment took place.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

Fig. F.2.A. Full sample.

Fig. F.2.B. Berlin sample.

Fig. F.2.C. Leipzig and Dortmund sample.

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D. Ariely et al. European Journal of Political Economy xxx (xxxx) xxx

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