Neighborhood Effects and Social Behavior : The Case of Irrigated and Rainfed Rice Farmers in Bohol

~Emergence of Social Norms and Community Mechanisms~ Takuji W. Tsusaka Kei Kajisa Valerien O. Pede Keitaro Aoyagi
Thanks: JICA Lolit Garcia Elmer Suaz Edmund Mendez Evangeline Austria Ma. Indira Jose Neale Paguirigan Accepted by 2012 AAEA (Agricultural and Applied Economics Association of USA)

According to the reviewers of the conference,

Experimental methods, spatial econometrics, and survey methods are nicely blended in a single study. The study provides innovative approaches to investigate the spillover effect of social behaviors. Excellent job!!

Social Behavior
Social Behavior Social Relationship Mutual Trust

Social Interaction

Often used as synonyms and are considered to be forms of social capital, although they may carry different connotations (Ionnides & Topa, 2010) Plays a crucial role in rural development and poverty reduction. Mechanism to induce effective collective actions and reduce transaction costs in a variety of ways (Hayami 2009, Arrow 1999, Solow 1999). Empirical and theoretical supports: Grootaert & van-Bastelaer (2008), Krishna (2007), Chou (2006), Isham et al. (2002), Zack & Knack (2001), Knack & Keefer (1997), etc. etc.

Neighborhood Effect and Social Behavior (Objective)

Our View: Since social behavior takes place between people, it is natural to suppose that such behavior may affect other peoples behavior; i.e., there must be spillovers and externalities of social behavior.

Social Behavior/Social Capital Neighborhood Effects

Blume, Bandiera, Brock, Durlauf, Moffitt, Raudenbush, Sampson, Cook, Manski etc. Ionnides, Topa Hayami, Grootaert, van-Bastelaer, Krishna, Chou, Isham, Zack, Knack, Arrow, Solow, Keefer, etc.

using behavioral game experiments

Onesa, Putterman, Dufwenberg, Muren, Cook, Cooper, Eckel, Wilson, Bohnet, Zeckhauser, Ben-Ner, etc.
3

using spatial econometrics..

Bandiera, Rasul, Conley, Udry, Anselin, Griffith, etc.

For example, Yi = Social Behavior (e.g. Trusting) Xi = Individual Profile (e.g. Age)

Neighborhood Effect
Yj Xj Yj Xj

i = Residual

Yi

j
Endogenous Social Effect or Spatial Lag Effect Yj Exogenous Social Effect or Cross Effect or Contextual Effect Correlated Social Effect or Perturbation Effect Xi

j
Yj

Xj

Xj

Spatial Econometric Approach (1) Neighborhood Definition

Weight Matrix n observations n
0 1 0 1 0 0 0

after normalization

n Spatial Lag Operator x1 x2 x3 xn x averaged over neighbors for obs 1 x averaged over neighbors for obs 2 x averaged over neighbors for obs 3 x averaged over neighbors for obs n
5

X =

WX =

Spatial Econometric Approach (2) Model Specification

1) a-Spatial Model
Y = 1X + 1 Spatial Diagnostics Lagrange Multiplier Tests Morans I Lag Test Error Test Robust Lag Test Robust Error Test SARMA Test

2) Cross Regression Model

Y = 2X + 2WX + 2

3) Spatial Regression Model (Maximum Likelihood Estimation) a) Lag Model (w/Cross) ( Spatial Durbin Model)
Y = 3WY + 3X + 3WX + 3

b) Error Model (w/Cross)

Y = 4X + 4WX + 4 , 4 = 4W4 + 4

c) ARAR Model (w/Cross)

Y = 5WY + 5X + 5WX + 5 , 5 = 5W5 + 5
6

Behavioral Game Experiment

Purpose: To elicit individuals social behavior quantitatively.

General Instructions
All participants receive a pre-paid show-up fee of P50 at the beginning. The games deal with actual money. Whatever money participants win in games will be theirs to take home. The amount they win depends on the decisions they make during the games. The games must be taken seriously. They are not allowed to talk to other participants during the entire event. If they fail to follow the rule, they will not be given the post-paid show-up fee, P100 at the end of all experiments.

Dictator Game
The game is played by pairs. Your anonymous partner is in a separate room. You never know who it is. At the beginning, you (sender) get P100/Your partner (receiver) gets nothing. Your partner will receive a transfer from you/You will not receive any money from your partner. The amount you keep is your payoff of this game/The amount your partner receives is his/her payoff of this game. How much do you transfer to your partner, if your partner is someone in your barangay?

Dictator Game Example

Your Room (Senders) The other Room (Receivers)

Keep: P50

Send: P50
A (You) ?

Receive: P50

Keep: P100

Send: P0
B ?

Receive: P0

Keep: P0

Send: P100
C ?

Receive: P100

The amount you keep is your payoff of this game

The transferred amount is recorded as the game result, and is interpreted as a measure of your altruistic behavior.

The amount they receive is their payoff of this game

10

Behavioral Game Experiment

Public Goods Game (Two Rounds) 1st Round
The game is played by groups of four people of which you are one. The three anonymous partners are in a separate room. You never know who they are. At the beginning, you (sender) and your partners (receivers) get P100 each. You and your partners confidentially contribute some amounts to the group. The total amount contributed will be doubled, and the doubled amount will be shared equally among all members, regardless of your contribution. The amount you keep plus the amount you receive back from the group is your payoff of this game. How much do you contribute to the group, if your partners are some ones in your barangay?

11

Keep P 50
You

Keep P 50
A

Keep P 50
B Contribute P 50

Keep P 50
C Contribute P 50

Contribute P 50 Contribute P 50

The contributed amount is recorded as the game result, and is interpreted as a measure of your contributory behavior to public goods.

(50+50+50+50) P 200

2
P 400

Public Goods Game Round 1, Example

Receive P 100
P 50

Receive P 100
P 50

Receive P 100
P 50

Receive P 100
P 50

P 150
Payoff

P 150
Payoff

P 150
Payoff

P 150
Payoff
12

Behavioral Game Experiment

Public Goods Game (Contd)
Therefore, the game has an aspect of investment. What if you increase/decrease your contribution, others contributions kept unchanged?

Case1
Contribution Payoff

You 50 150 You 20 165 You 80 135 You 80 180

Partner A Partner B Partner C 50 50 50 150 150 150 Partner A Partner B Partner C 50 50 50 135 135 135 Partner A Partner B Partner C 50 50 50 165 165 165 Partner A Partner B Partner C 80 80 80 180 180 180

Case2
Contribution Payoff

Incentive for cheating (free-riding)

Case3
Contribution Payoff

Case4
Contribution Payoff

Importance of Collective Action

13

Behavioral Game Experiment

Public Goods Game (Contd) After the 1st Round
You can secretly check the contribution from each partner by paying P1. Then, you can send a message to particular partners to indicate that you are unhappy with that persons contribution, by paying P1 per message. We will consider two variables in the analysis Message Receipt Dummy Indicator for peer pressure on you Free-riding Index (FRI) Group Members Average Contribution Your Contribution Check Dummy

Indicator for degree of awareness of own free-riding

Then, Play the 2nd Round

with the same partners as in the 1st round.

The contributed amount is recorded as the result of the second round, and is interpreted as a measure of your contributory behavior to public goods in the presence of monitoring mechanism.
14

Our Study Site

San Miguel/Trinidad/Ubay, Bohol

Thanks to Arnel & Nel !

Figure by Barkada Tours

15

Our Data
Primary Data
Agricultural and Socioeconomic Data ( X)
4 crop seasons from 2009 to 2010 One half of the irrigated farmers (randomly selected): Volumetric pricing system The other half: Area size based flat rate Volumetric Pricing Dummy

Geographical Coordinates (

W)
Two types of neighborhood can be defined

Both farm plots and residences.

Behavioral Game Results (

Y)
The sample for this study

243 randomly selected farmers Irrigated (N = 132) & Rain-fed (N = 111)

16

Data: Descriptive Statistics

Agricultural & Socioeconomic Variables (X)
Sample Mean (Standard Deviation) Overall (N=243) Irrigated Areas (N=132) Rainfed Areas (N=111)
t-test for mean difference [p-value]

Volumetric Pricing Dummy Age Gender Dummy Years of Schooling Ln Asset Field Size (ha) Household Size (head count) Household Female Ratio
Value for the last season Averaged over the 4 seasons
Statistical Significance: *** 1 %, * 10%

0.561
(0.498)

51.062
(12.019)

49.689
(12.248)

52.694
(11.585)

3.004
[0.052]

0.708
(0.456)

0.758
(0.430)

0.649
(0.480)

0.109
[0.063]

6.395
(3.0384)

6.144
(2.922)

6.694
(3.159)

0.550
[0.160]

10.578
(1.132)

10.444
(1.193)

10.738
(1.038)

0.295
[0.718]

1.585
(1.058)

1.167
(0.682)

1.754
(1.228)

0.586
[0.000]

***

5.936
(2.302)

6.144
(2.321)

5.689
(2.265)

0.455
[0.125]

0.500
(0.162)

0.484
(0.148)

0.519
(0.176)

0.035
[0.092]

17

Data: Descriptive Statistics

Behavioral Game Results (Y) & Control Variables
Sample Mean (Standard Deviation) Overall (N=243) Irrigated Areas (N=132) Rainfed Areas (N=111) t-test for mean difference [p-value]

Dependent Variables (Y) Dictator Game PGG Round 1 PGG Round 2 Controls for PGG Risk Preference PGG R1 Message Receipt Dummy PGG R1 Free-riding Index

30.041
(20.236)

32.197
(21.555)

27.477
(18.314)

4.719
[0.070]

54.403
(23.033)

53.182
(22.080)

55.856
(24.139)

2.674
[0.368]

52.140
(24.350)

51.818
(23.633)

52.523
(25.279)

0.704
[0.823]

53.786
(25.898)

54.470
(24.380)

52.973
(27.686)

1.497
[0.655]

0.280
(0.450)

0.273
(0.447)

0.288
(0.455)

0.016
[0.789]

-0.110
(15.335)

0.455
(14.746)

-0.781
(16.049)

1.235
[0.533]

Statistical Significance: * 10%

18

Defining the Neighbors

Weight Matrices (W) 2 Areas Irrigated Rainfed 2 types of neighborhood

Residential Neighborhood Plot Neighborhood Threshold Distance

4 Weight Matrices

How did we choose neighbors??

Too short
d You

Some people will have no neighbor Those observations will be dropped.

d You

Too long

Boundary Bias Problem (e.g. Griffith, 1983)

19

Impose the shortest possible threshold distance. (GeoDa does it)

Defining the Neighbors

Individually Calculated 4 Threshold Distances (a) (b) (c) (d) Plot Neighborhood/Irrigated Farmers Plot Neighborhood/Rainfed Farmers Residential Neighborhood/Irrigated Farmers Residential Neighborhood/Rainfed Farmers. km 0.959 1.302 0.956 1.376

Use this as a uniform threshold distance

Neighborhood Structures; Statistics

@Threshold Distance = 0.956km

Field Plot Neighbors Irrigated Areas (a) 131 860 5.01 6.565
(2.649)

Weight Code Number of Observations Total Number of Neighbor Relations Nonzero Weights (%) Avg. Num. of Neighbors Avg. Distance bet. Neighbors (km)

Rainfed Areas (b) 109 1166 9.81 10.697

(4.309)

t-test for mean difference [p-value]

Residential Neighbors Irrigated Areas (c) 132 866 4.97 6.561

(3.119)

4.132
[0.000]

Rainfed Areas (d) 110 1292 10.68 11.746

(5.409)

t-test for mean difference [p-value]

5.185
[0.000]

0.603
(0.236)

0.587
(0.239)

0.016
[0.293]

0.583
(0.243)

0.574
(0.252)

0.009
[0.564]

20

Defining the Neighbors

Distribution of the Number of Neighbors
(a) Plot/Irrigated
20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 1112 13 1415 1617 1819 20 2122 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 1112 13 1415 1617 1819 20 2122

(b) Residential/Irrigated

(c) Plot/Rainfed
20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 1112 13 1415 1617 1819 20 2122 20 15 10 5 0

(d) Residential/Rainfed

1 2 3 4 5 6 7 8 9 10 1112 13 1415 1617 1819 20 2122

21

Defining the Neighbors

Graphical Representations

(b) Plot/Rainfed

(d) Residential/Rainfed

(a) Plot/Irrigated

(c) Residential/Irrigated

22

Summarized Hypotheses
H1) Social behaviors of individual farmers are influenced by their neighbors social behaviors and personal attributes. H2) Neighborhood effects on social behaviors, particularly contribution to public goods, are higher in the irrigated areas vis--vis in the rain-fed areas. H3) In the irrigated areas, farmers are more contributory to public goods when they are engaged in volumetric water pricing system than in area-based flat rate system. H4) The endogenous social effects on public goods contribution are larger among farm plot neighbors than among residential neighbors.

23

Results: Spatial Model Diagnostics

Lagrange Multiplier Tests on Cross Regression Residuals for Spatial Dependence Identification
Game Experiment Neighborhood Ecosystem Moran's I Irrigated 0.042
(0.050)

Dictator Game Plot Rainfed -0.031

(0.385)

Public Goods Game, Round 1 Residential Plot Irrigated -0.087

(0.849)

Public Goods Game, Round 2 Plot Irrigated 0.119

(0.000)

Residential Irrigated 0.004

(0.246)

Residential Rainfed -0.016

(0.241)

Irrigated 0.131
(0.001)

***

Rainfed -0.126
(0.990)

Rainfed 0.060
(0.004)

***

Rainfed -0.010
(0.219)

***

Irrigated 0.162
(0.000)

***

Rainfed 0.014
(0.081)

Error Correlation

0.616
(0.433)

5.332
(0.021)

**

1.511
(0.219)

5.001
(0.025)

**

8.135
(0.004)

***

0.083
(0.773)

Lag Correlation

3.034
(0.082)

7.854
(0.005)

***

1.831
(0.176)

10.961
(0.001)

***

9.849
(0.002)

***

0.974
(0.324)

Error Correlation Robust Lag Correlation Robust SARMA

12.977
(0.000)

***

2.540
(0.111)

0.623
(0.430)

0.375
(0.540)

0.214
(0.644)

1.165
(0.281)

15.395
(0.000)

***

5.062
(0.024)

**

0.943
(0.332)

6.335
(0.012)

**

1.928
(0.165)

2.0555
(0.152)

16.011
(0.000)

***

10.394
(0.006)

***

2.453
(0.293)

11.336
(0.003)

***

10.062
(0.007)

***

2.138
(0.343)

Spatial Model of Our Choice

Lag & Cross

Cross

Lag & Cross ARAR & Cross

Cross

Cross

Cross

Cross

Cross

Lag & Cross

Cross

Cross

Cross

For Robustness Check

(Statistical Significance: *** 1 %, ** 5%, * 10%, 15% )

Lag & Cross

Results: Spatial Estimation

Dictator Game
Neighborhood Ecosystem Spatial Model Irrigated Lag & Cross

Plot
Rainfed Lag & Cross

Residential
Irrigated ARAR & Cross *** 0.331 0.034 Rainfed

Cross

Cross

WY W

Endogenous Social Effect () Correlated Social Effect () Neighbors' Characteristics () Volumetric Pricing Dummy Age Gender Dummy Years of Schooling Ln Asset Field Area (ha) Household Size Household Female Ratio Own Characteristics () Volumetric Pricing Dummy Age Gender Dummy Years of Schooling Ln Asset Field Area (ha) Household Size Household Female Ratio

0.239 *

0.352

WX

-13.630 * 0.123 4.382 -0.750 -0.887 16.206 *** -2.513 -2.364 -2.131 -0.201 2.914 0.610 -0.374 -0.118 -0.323 29.147 **

0.060 -24.624 -4.222 10.944 3.016 -2.327 -2.837

* * *

-11.492 -0.105 11.062 -1.288 5.075 8.419 -1.876 21.705 -0.327 -0.263 3.526 0.221 -0.308 -0.956 -0.377 30.608

-11.601 -0.128 11.584 -1.322 5.230 8.361 -1.895 23.196 -0.371 -0.266 * 3.605 0.213 -0.290 -0.920 -0.387 30.845 **

0.445 8.701 1.294 -1.344 4.183 -2.070 -5.491

-0.091 3.098 0.282 0.854 2.322 0.261 3.188

**

-0.121 5.631 0.334 -0.347 2.324 0.462 -4.975

Statistical Significance: *** 1 %, ** 5%, * 10%, 15%.

Results: Spatial Estimation

Public Goods Game, Round 1 WY W
Neighborhood Ecosystem Spatial Model Endogenous Social Effect () Correlated Social Effect () Neighbors' Characteristics () Volumetric Pricing Dummy Age Gender Dummy Years of Schooling Ln Asset Field Area (ha) Household Size Household Female Ratio Own Characteristics () Volumetric Pricing Dummy Age Gender Dummy Years of Schooling Ln Asset Field Area (ha) Household Size Household Female Ratio Control Risk-Taking Behavior -9.637 -0.623 -9.676 -0.152 0.013 8.575 -1.822 11.186 0.221 -0.450 *** -4.709 0.112 2.323 5.586 * -0.742 20.000 0.227 *** -11.411 -0.682 -10.821 0.533 3.425 2.966 1.453 -8.118 0.217 -0.441 -5.778 0.236 1.307 5.754 -0.575 18.812 0.215 * Irrigated Cross

Field Plot
Rainfed Cross Irrigated Cross

Residential
Rainfed Cross

WX

0.548 19.125 -0.088 -3.671 -7.042 -0.502 11.712

-0.520 35.160 ** -1.508 -3.891 5.672 0.633 31.177

-0.713 *** -3.032 -0.194 2.589 -2.125 -0.717 -18.463 0.132

***

-0.743 *** -2.514 -0.044 0.981 -1.965 -0.889 -14.913 0.135

Statistical Significance: *** 1 %, ** 5%, * 10%, 15%.

***

Results: Spatial Estimation

Public Goods Game, Round 2
Neighborhood Ecosystem Irrigated Lag & Cross

Field Plot
Rainfed

Residential
Irrigated Lag & Cross Rainfed

WY WY Endogenous Social Effect () W Neighbors' Characteristics () W

Volumetric Pricing Dummy Age Gender Dummy Years of Schooling WX Asset Ln Field Area (ha) Household Size Household Female Ratio Own Characteristics () Volumetric Pricing Dummy Age Gender Dummy X Years of Schooling Ln Asset Field Area (ha) Household Size Household Female Ratio Controls Risk-Taking Behavior Round 1 Message Receipt Dummy Round 1 Free Riding Index Round 1 MRD x FRI Round 1 Own Contribution

Spatial Model

Cross
***

Cross

Cross
***

0.332
1.337 -0.317 0.439 -2.103 2.964 0.574 -0.577 -8.270 3.199 0.167 2.492 0.371 1.746 -0.716 0.613 7.872 0.126 7.312 0.212 0.440 0.847

0.284
-11.436 -0.276 -3.750 1.360 -1.520 8.166 0.798 -35.690 3.314 0.179 0.690 0.385 1.110 1.028 0.567 2.114
*** ** *

WX

-0.584 14.381 3.266 -0.095 2.848 3.104 19.684

-6.470 -0.221 -1.077 0.428 -1.265 3.265 0.224 -28.779 4.083 0.187 2.059 0.366 1.330 0.302 0.517 5.034

-0.579 25.875 1.365 -3.677 4.391 4.020 -19.813

-0.169 0.145 0.214 0.954 -2.529 0.219 -5.448

** ** * ** ***

-0.089 -0.156 0.322 0.387 -2.671 0.144 -6.961 0.240 11.731 0.093 -0.289 0.584

Statistical Significance: *** 1 %, ** 5%, * 10%, 15%.

0.252 11.574 0.014 -0.358 0.542

***

0.193 7.139 0.232 0.471 0.821

*** * * * ***

0.161 7.416 0.266 0.419 0.840

*** ** ** ** ***

*** **

***

Summary of the Results

Hypothesis Verification
H1) Social behaviors of individual farmers are influenced by their neighbors social behaviors and personal attributes.

H1

The endogenous social effects among irrigated farmers are found in dictator game and monitored public goods game. The exogenous social effects are minor on the whole. No correlated social effects are found.

H1 is accepted to the extent that it depends on the irrigation availability and the type of social behavior. H2) Neighborhood effects on social behaviors, particularly contribution to public goods, augment in the irrigated areas vis--vis in the rain-fed areas.
There exists a clear contrast in the result between the two ecosystems. The endogenous social effects and the impact of FRI are found only in the irrigated areas.

H2

H2 is definitely supported. H3) In the irrigated areas, farmers are more contributory to public goods when they are engaged in volumetric water pricing system than in area-based flat rate system
Volumetric water pricing makes no difference in the outcome of dictator game and pre-monitoring public goods game It has a minimal positive effect in monitored public goods game.

H3

H3 is only weakly supported. H4) The endogenous social effects on public goods contribution are more salient among farm plot neighbors than among residential neighbors.

H4

The spillover of public goods contribution under monitoring is stronger among plot neighbors than among residential neighbors.

H4 is clearly accepted.
28

Concluding Remarks
I. Emergence of social norms and community mechanisms in irrigated society. i. Farmers altruistic behavior and contributory behavior spill over to their neighbors, indicating that collective actions required in irrigation water management induce the emergence of social norm: farmers decide on their social behavior more or less by following the way their neighbors behave socially.

ii. Cooperative resource management also promotes a community mechanism: free riding acts are corrected. iii. This irrigation system was introduced in 2008. It is implied that, by intervention schemes such as the construction of gravity irrigation, changes in social norm and community mechanism occur rather shortly than slowly. Essential Assumption: There was no intrinsic difference in behavioral spillover among irrigated farmers and among rainfed farmers prior to the construction of irrigation, which is partially supported by the descriptive tables.

29

Concluding Remarks
II. Limitations & Possible Extensions: i. The contrasting result between the two ecosystems may be partially attributed to the relative concentration of neighbors in the rainfed areas, (in addition to the relatively independent agricultural practices). The result would be more convincing if we could separate out the former factor.

ii. Number of neighbors (k-nearst neighbors) and Distance to neighbors (threshold distance) are 2 conflicting criteria commonly used in constructing weight matrices. We have assumed the fairness of imposing the same threshold distance across the 4 types of neighborhood. It may be interesting to use a k-nearest neighbor criterion, though the choice of k has to be justified some way. iii. The next step of this research may be to estimate social behaviors using social distance instead of geographical distance. Such a study will explore how personal relationship affects the spillover of social behavior (and will also be applicable to situations in which geographical distance is not a hard constraint).

30

Appendix

31

Marginal Effect vs. Coefficient

Consider the endogenous social effects. Let be the marginal effect. + 11 k 3
2k-1 + 12 5 + 13 7 + = j-1 = k k j=1 k 0.5000 0.5217 0.5217 0.5208 0.4110 0.4110 0.4107 0.3046 0.3046 0.3045 0.2013 0.2013 0.2013 0.1002 0.1002 0.1002 bias (%) 4.35 4.34 4.17 2.74 2.74 2.67 1.52 1.52 1.50 0.67 0.67 0.67 0.17 0.17 0.17

Order of Approximation 7th 5th 3rd 7th 5th 3rd 7th 5th 3rd 7th 5th 3rd 7th 5th 3rd

0.4000

0.3000

marginal effect () coefficient () bias (%) 0.5000 0.5217 4.35 0.4000 0.4110 2.74 0.3000 0.3046 1.52 0.2000 0.2013 0.67 0.1000 0.1002 0.17

0.2000

0.1000

32

Marginal Effect vs. Coefficient

Consider the exogenous social effects. Let be the marginal effect.

= (1+ +

+ .........) = j =
j=0

1-

(if 0 < < 1)

When = 0.3 , then 1.4

33