NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Self-Esteem, Moral Capital, and Wrongdoing

Ernesto Dal Bó, Marko Terviö

NBER Working Paper No. 14508
Issued in November 2008
NBER Program(s):   LE   POL

We present an infinite-horizon model of moral standards where self-esteem and unconscious drives play key roles. In the model, an individual receives random temptations (such as bribe offers) and must decide which to resist. Individual actions depend both on conscious intent and a type reflecting unconscious drives. Temptations yield consumption value, but keeping a good self-image (a high belief of being the type of person that resists) yields self-esteem. We identify conditions for individuals to build an introspective reputation for goodness ("moral capital") and for good actions to lead to a stronger disposition to do good. Bad actions destroy moral capital and lock-in further wrongdoing. Economic shocks that result in higher temptations have persistent effects on wrongdoing that fade only as new generations replace the shocked cohorts. Small parametric differences across societies may lead to large wrongdoing differentials, and societies with the same moral fundamentals may display different wrongdoing rates depending on how much past luck has polarized the distribution of individual beliefs. The model illustrates how optimal deterrence may change under endogenous moral costs and how wrongdoing may be compounded as high temptation activities attract individuals with low moral capital.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w14508

Published: SELF-ESTEEM, MORAL CAPITAL, AND WRONGDOING Ernesto Dal Bó1, Marko Terviö2 Article first published online: 3 JUN 2013 DOI: 10.1111/jeea.12012 © 2013 by the European Economic Association Issue Journal of the European Economic Association Journal of the European Economic Association Themed Issue: Social Norms: Theory and Evidence from Laboratory and Field Volume 11, Issue 3, pages 599–663, June 2013

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