Does Scarcity Reduce Cooperation? Experimental Evidence from Rural Tanzania

Cooperation is essential to reap efficiency gains from specialization, not least in poor com-munities where economic transactions often are informal. Yet, cooperation might be moredifficult to sustain under scarcity, since defecting from a cooperative equilibrium can yieldsafe, short-run benefits. In this study, we investigate how scarcity affects cooperation byleveraging exogenous variation in economic conditions induced by the Msimu harvest in ru-ral Tanzania. We document significant changes in food consumption between the pre- andpost-harvest period, and show that lean season scarcity reduces socially efficient but per-sonally risky investments in a framed Investment Game. This can contribute to what iscommonly referred to as a behavioral poverty trap.