TY  - JOUR
AU  - Bó,Ernesto Dal
AU  - Terviö,Marko
TI  - Self-Esteem, Moral Capital, and Wrongdoing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14508
PY  - 2008
Y2  - November 2008
UR  - http://www.nber.org/papers/w14508
L1  - http://www.nber.org/papers/w14508.pdf
N1  - Author contact info:
Ernesto Dal Bó
University of California, Berkeley
Haas School of Business
545 Student Services Building #1900
Berkeley, CA 94720-1900
Tel: 510 643 1606
E-Mail: dalbo@haas.berkeley.edu

Marko Tervio
Helsinki School of Economics
PL 1210
00101 Helsinki
Finland
E-Mail: marko.tervio@hse.fi
AB  - 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.
ER  -