1

WAITING FOR NAPOLEON?

DEMOCRACY AND RECIPROCITY

ACROSS SOCIAL GROUPS

Devesh Rustagi and Marcella Veronesi∗

Abstract

What explains large and persistent differences in reciprocity across social groups? This paper exploits variation in historical experience of democracy over space and time in Switzerland to highlight its strong positive association with reciprocity today. Individuals from regions that experienced democracy since the Middle Ages display stronger reciprocity than individuals from regions that acquired democracy only after the invasion by Napoleon. Because historical democracy was widespread in Swiss German but limited in Swiss French speaking regions, individuals from these groups differ widely in their reciprocity. The difference, however, disappears when we compare Swiss Germans and Swiss French from regions without historical democracy. These results are not capturing current institutions, beliefs, migration, historical dynasties, language and other group specific characteristics. Further results suggest that the emergence of historical democracy was due to idiosyncratic events and that its effect on reciprocity persists due to intergenerational transmission.

JEL: C93, D02, N43, H41, Z10

Keywords: Democracy, reciprocity, social groups, public goods game, intergenerational transmission, Switzerland, von Zaehringen.

∗ Rustagi: Goethe University Frankfurt, Faculty of Economics and Business Administration, Theodor W-Adorno Platz 4, D - 60323 Frankfurt am Main, Germany. Email: rustagi@econ.uni-frankfurt.de. Veronesi: University of Verona, Department of Economics, Via Cantarane 24, 37129 Verona, Italy; and Center for Development and Cooperation (NADEL), ETH Zurich. Email: marcella.veronesi@univr.it. We acknowledge financial support from the Professorship of Environmental Policy and Economics at ETH Zurich, funds from Prof. Dr. Willi Zimmermann, and Alfons and Gertrud Kassel-Stiftung. We are grateful to seminar participants at Bocconi University, Development Workshop at Mannheim, ETH Zurich, Goethe University Frankfurt, University of Geneva, HEC Lausanne, University of Marburg, LMU Munich, University of Lund, Nagoya City University, Social Norms Workshop at University of East Anglia, 11th NCBEE Conference, 3rd International Meeting on Experimental and Behavioral Social Sciences, 57th SIE Conference, 5th AERE Conference, 5th IAERE Conference, and 22nd EAERE Conference for helpful comments. Our special thanks also to Simon Hess, Nicola Fuchs-Schündeln, Saumitra Jha, Michael Kosfeld, Peter Martinsson, Emilia Soldani, Rajesh Ramachandran, Noam Yuchtman, and Marco Zanoli for helpful discussions.

2

I. Introduction

Reciprocity is viewed as playing an important role for a variety of social and economic

outcomes.1 These include public goods provision, teamwork in organizations, functioning of

incentives, charitable giving, tax compliance, and support for redistributive policies.2 Defined

as a tendency to respond to acts perceived to be kind with kindness and those perceived to be

mean with meanness, reciprocity differs fundamentally from behavior that is due to benefits

from repeated interaction and reputation formation (Fehr and Gächter 2000, Sobel 2005,

DellaVigna 2009).3 Further evidence shows that reciprocity differs widely across groups and

forms a key element of social capital that is viewed as fundamental for collective action and

economic development (Putnam et al. 1993, Platteau 2000, Bowles and Gintis 2002, Guiso et

al. 2011). Yet, our understanding of what social and economic conditions drive differences in

reciprocity and why do these differences persist over time remains poor. In this paper, we

exploit spatial and temporal variation in historical experience of democracy to study how this

associates with reciprocity today across individuals from different social groups.

The interplay between democracy and reciprocity is discussed widely in the social

sciences (Putnam et al. 1993, Rodrik 2000, Uslaner 2003, Tabellini 2010). According to these

studies, democratic institutions are hypothesized to foster reciprocity via allowing for greater

participation in decision-making and constraints on the executive. This encourages

individuals to interact, deliberate, and learn to compromise, thereby changing the type of

people we are by making us less selfish and more public-spirited. As Rodrik (2000) points

out when “individuals meet and deliberate, they come to understand each other’s view-points,

develop empathy, recognize the value of moderation, internalize the common interest, and

de-emphasize narrow self-interest”. Tabellini (2010) and Platteau (2000) further argue that

when the power of the elite is constrained by checks and balances, it fosters participation by

bringing together individuals from different interest groups for a common cause. In contrast,

in autocratic regimes, strong hierarchy of privileges that are accessible only to a small group

of people are likely to foster opportunistic free riding as opposed to a disposition for

reciprocity. In summary, exposure to democracy is hypothesized to encourage individuals to

1 See for instance Putnam 1993, Ostrom et al. 1999, Platteau 2000, Fehr and Gächter 2000, Sobel 2005, DellaVigna 2009. For motivations underlying reciprocity see theoretical contributions by Fehr and Schmidt 1999, Bolton and Ockenfels 2000, Dufwenberg and Kirchsteiger 2004, Falk and Fischbacher 2006. 2 For example: Frey and Meier 2004, Bandiera et al. 2005, Rustagi et al. 2010, Bowles and Polonia-Reyes 2012. 3 Reciprocity is different from altruism, which is a form of unconditional kindness that does not “emerge as a response to altruism received” (Fehr and Gächter 2000). Reciprocity is also considered as one of the key motives underlying trust and trustworthiness (Fehr 2009).

3

set aside narrow self-interest and instead develop values of reciprocity. These values could

then persist over time due to intergenerational transmission (Bisin and Verdier 2011).

Although field and laboratory studies show that stronger cooperation emerges when

democratic participation is possible (Bardhan 2000, Frey 1998, Dal Bo et al. 2010, Sutter et

al. 2010), thus far the connection to reciprocity is only suggestive. We attempt to fill this gap

by conducting our study in Switzerland, which provides a unique natural laboratory.

Switzerland offers large variation in the experience of historical democracy as well as

linguistic groups. We show that individuals from regions that experienced democracy since

the Middle Ages display stronger reciprocity today than individuals from regions who

experienced democracy only after the invasion by Napoleon (see Figure 1). Because

historical democracy was widespread in Swiss German than Swiss French speaking regions,

we observe a strong gap in reciprocity across individuals from these two regions today (see

Figure 2). Moreover, the gap disappears once we compare Swiss Germans and Swiss French

from regions without historical democracy. These results are not capturing current

institutions, beliefs, migration, dynasty, language and other group specific characteristics.

The Swiss setting is ideal for our study because of differences across space and time in

the experience of historical democracy that included in its ambit both urban and rural areas.

Starting 13th century, many rural and urban areas of Switzerland developed early forms of

democracy that offered local people opportunities for self-governance, for instance via the

election of council members and voting on policies in public assemblies. In contrast, the

remaining areas were subjected to feudalistic institutions, where individuals could neither

elect their council members nor vote on public policies. Instead, in these areas council

members were either appointed or elected from among patrician families, at times even for

life. This created a mosaic of landscapes with and without opportunities for self-governance

even within a canton whose boundaries today are mostly coterminous with historical cantonal

boundaries in the 16th century.4 This situation persisted for hundreds of years until Napoleon

invaded Switzerland in 1798 and issued the Act of Mediation in 1803 allowing every region

the possibility of self-governance. We refer to the experience of democracy in the period

preceding 1803 as ‘historical’ and the period thereafter as ‘modern’. While modern

institutions of democracy vary only at the cantonal level, historical democracy varies even

within cantons, allowing us to use canton fixed effects to separate historical from modern

institutions of democracy and to account for historical differences across cantons.

4 A canton is an administrative unit in Switzerland that is equivalent to a state.

4

Measuring reciprocity using real world interactions is challenging because behavior that

seems consistent with reciprocity might be actually be due to confounding motives arising

from repeated interaction and reputation formation benefits (Fehr and Gächter 2000, Sobel

2005, DellaVigna 2009). Moreover, individuals from different groups might have the same

disposition for reciprocity and yet behave differently because of differences in their beliefs

about the cooperation of others. For instance, reciprocators with optimistic beliefs about the

cooperation of others are expected to cooperate but reciprocators with pessimistic beliefs are

expected to defect. In such situations, one might wrongly infer a reciprocator with pessimistic

beliefs as a free rider resulting in measuring multiple equilibria rather than the difference in

reciprocity per se. This concern is accentuated when the comparison is across individuals

from diverse groups, as different groups might coordinate on different equilibria. To resolve

these challenges, we use a controlled behavioral experiment to measure reciprocity.

Following Fischbacher et al. (2001) and Fischbacher and Gächter (2010), we implement

a standard one-shot anonymous public goods game in the strategy method to preclude future

material benefits as well as beliefs from playing a role.5 The experiment is conducted online

among a representative sample of Swiss Germans and Swiss French. In the experiment,

individuals are paired in a two-person experimental group. Each player has to decide on his /

her contribution to a public good conditional on a set of contribution decisions of another

player. Individuals who are reciprocators are expected to match their contribution in the

contribution of the other player, whereas free riders are expected to contribute zero in every

decision regardless of what the other player does. Following the literature, we use the

Spearman correlation between self and other players’ contribution as a revealed measure of

reciprocity – the stronger the Spearman correlation, the stronger is the disposition for

reciprocity. The average reciprocity in our sample is 0.65 (s.d. 0.55).

Since different areas in Switzerland acquired historical democracy at different points in

time, we develop measures of historical democracy at both the extensive and the intensive

margin. Our data show that Swiss Germans are nearly four times more likely to be from

municipalities with historical democracy than Swiss French and also with a longer duration

by over 200 years. Following aforementioned studies (Platteau 2000, Rodrik 2000, Tabellini

2010), postulating a positive association between democracy and reciprocity, we expect

Swiss Germans to have stronger reciprocity than Swiss French.

Our results confirm this. The propensity for reciprocity among Swiss Germans is 0.73, 5 This experiment has been used in a variety of countries to measure reciprocity and has also been validated in studies by Rustagi et al. (2010) and Kosfeld and Rustagi (2015).

5

while that among Swiss French is only 0.41. The gap remains large in magnitude at 0.29

points and is highly significant even when we control for a rich set of individual, municipal

and cantonal level covariates or even canton fixed effects. This means that for each additional

10 Swiss Francs contributed by the other player, Swiss Germans contribute 2.1 Swiss Francs

more than Swiss French, which is 57 percent of the contribution by Swiss French.

If this gap is due to group specific differences in historical democracy, then it should

disappear when historical democracy is lacking. We check this via a falsification test in

which we restrict our sample to Swiss Germans and Swiss French who are from

municipalities that did not experience historical democracy. The magnitude of the gap in

reciprocity drops from 0.29 to 0.04 and is no longer statistically significant.

The above results point towards a positive association between reciprocity and historical

democracy. However, these results could be capturing the effect of omitted variables and

might also be prone to reverse causality. We address these concerns in several steps. First, we

include a rich set of individual and municipal / cantonal controls that are hypothesized in the

literature to matter for reciprocity. These include age, education, gender, household income,

religion, politics, geography, income inequality, GDP per capita, share of foreigners, and an

index of business competition. Second, we also consider the historical counterpart of these

variables to ensure that we are not capturing differences in historical development and

education. Third, we introduce a variety of fixed effects to ensure that our estimates are not

capturing differences in canton specific factors (such as modern democracy), historical

dynasties with which the municipalities were associated at different points in time, as well as

social groups, for instance by dropping Swiss French altogether from our sample. Fourth, we

show that our results hold when an epidemiological approach is considered (Fernandez

2010). Fifth, we confirm our findings using an alternative dataset – the Swiss Household

Panel – where reciprocity is measured using data on values such as how justifiable it is to

cheat on taxes, lie in own interest, and claim state benefits not entitled to (Guiso et al. 2011).

We find that individuals from municipalities with historical democracy display higher

reciprocity by 0.42 points. This difference is not just statistically significant at the 1 percent

level, but it is also economically significant, especially given that the average reciprocity

among individuals from municipalities without historical democracy is 0.42. Moreover, one

standard deviation increase in the duration of historical experience (244 years) is associated

with an increase in reciprocity by 0.22 points. This implies that for each additional 10 Swiss

Francs contributed by the other player, individuals from municipalities with historical

democracy contribute 3.6 Swiss Francs more than individuals from municipalities without,

6

which is over 100 percent of the contribution by the latter. Similar estimates are obtained

when we introduce fixed effects for cantons, historical dynasties, and social groups.

Following Oster (2016) we find that selection on unobservables would have to be at least

twice as large as selection on observables for our results to be entirely attributed to a

selection bias.

An open question is why did some areas acquire democracy but others did not. Swiss

historiography concurs that the emergence of historical democracy was not systematic but

rather due to idiosyncratic events. One event with wider consequences was the abrupt

extinction of the Zaehringen dynasty when its last duke died of natural causes without an

heir. This led the German king to grant imperial immediacy to areas under the Zaehringen

rule. Historians consider this to be a watershed event that gave municipalities the impetus to

eventually move towards democracy (Zschokke 1860, McCrackan 1908, Eugster 2015,

Schultheiss 2015). The extinction of the Zaehringen line offers plausibly exogenous variation

in the emergence of democracy, especially after verifying that areas with and without the

Zaehringen rule do not differ in climate and soil suitability indices for agricultural crops in

the pre-1500 period, as well as in altitude and rugged land (Galor and Özak 2016). Our

results show a large, positive, and significant association of historical democracy with the

Zaehringen rule in the Middle Ages.

We use the extinction of the Zaehringen as an instrument for historical democracy. The

exclusion restriction is that the Zaehringen rule did not have any direct effect on reciprocity.

We show that when historical democracy is lacking, areas with and without the Zaehringen

rule do not differ in their reciprocity. Also, the association of the Zaehringen rule with

reciprocity disappears completely when we explicitly control for historical democracy. The

instrumental variables estimates of the effect of historical democracy on reciprocity is also

strongly positive, statistically significant, and similar in magnitude to its OLS counterpart.

These findings raise questions over the long run nature of the association between

historical democracy and reciprocity. We provide suggestive evidence on the role of inter-

generational transmission by examining whether the family background of an individual

matters in explaining the variation in reciprocity. For this purpose, we collect data on the

region of birth and region of stay of parents and grandparents of individuals in our sample.

We then build indices to characterize individuals on their degree of Swiss German family

background. Our results show that individuals with stronger Swiss German parental or

grandparental background display stronger reciprocity.

7

Our study connects to the literature showing the long-term effect of important historical

events, such as slavery, Jewish persecution in the middle ages, and the introduction of plough

in agriculture on trust, violence, and honesty today (Tabellini 2010, Nunn and Wantchekon

2011, Voigtländer and Voth 2012, Alesina et al. 2013, Jha 2013, Grosjean 2014, Becker et al.

2016, Lowes et al. 2017). We contribute to this literature by studying the association between

historical democracy and reciprocity. A paper closely related to ours is by Guiso et al. (2016)

who examine the association of free city-state experience in Italy in the Middle Ages with the

number of non-profit organizations, presence of an organ donation organization, and cheating

in math test today. Our paper distinguishes itself from previous studies in several ways. First,

unlike the free city experience, which as its name implies was restricted only to cities,

historical democracy in Switzerland was comprehensive in covering both rural and urban

areas. Second, we go beyond previous studies by conducting not just between but also within

state analysis. This allows us to highlight the importance of historical democracy over and

above current institutions of democracy, as well as other canton specific differences. Third, in

a similar vein, we exploit variation in historical democracy within historical dynasties and

social groups to account for dynasty and group specific factors. Fourth, our measure of

reciprocity is from a controlled experimental environment, which precludes confounding

motives arising from future interaction benefits and beliefs about the contribution of others.

As highlighted by Fehr and Gächter (2000), Sobel (2005), and DellaVigna (2009), this step is

necessary to distinguish reciprocity from alternative explanations. Fifth, we exploit the

plausibly exogenous extinction of the house of Zaehringen to shed some light on the

emergence of democracy (see for instance Aidt and Franck 2015). Finally, our study also

points towards the role of intergenerational transmission as a plausible channel behind the

persistence of historical effects.

The paper is organized as follows. Section II describes the field setting and historical

background. Section III describes data including our measures of social groups, historical

democracy, and experimental measures of reciprocity. Sections IV and V present results on

the association of reciprocity with social groups and historical democracy including the role

of intergeneration transmission as a plausible channel. Section VI offers concluding remarks.

8

II. Field Setting

A. Social Groups

The Swiss setting allows us to study differences in reciprocity across individuals from

different social groups using a within country and also a within canton setting.

Switzerland is home to four main native European languages: German, French, Italian,

and Romance that comprise 64, 23, 8, and 0.5 percent of the Swiss population (Swiss Federal

Statistical Office, see Figure 3)6. The focus of this study is on the speakers of German and

French, which are also the official languages in 25 out of the 26 states of Switzerland that are

called cantons. The share of these two groups in the Swiss population is 87 percent and has

remained stable both within and across cantons since the foundation of modern Switzerland

in 1848 (Swiss Federal Statistical Office).

Our focus on linguistic groups as social groups draws from studies in sociology and

economics outside of and within Switzerland that show language to be a powerful marker of

identity (Gumperz 1982, Giles and Johnson 1987, Clyne 1995, Eugster et al. 2011, Clots-

Figueras and Massella 2013). In fact, differences between Swiss Germans and Swiss French

are regularly emphasized in the Swiss media. For instance, a newspaper called Südostschweiz

(2000) described these two groups as “two fronts that stand opposite to each other”.

Reflecting a similar view, a Swiss weekly magazine Die Weltwoche wrote (2004)

“Switzerland consists of two halves: On the left hand side is the casual west (Swiss French),

on the right hand side the stricter east (Swiss German)”, and again (2007) “It is unequivocal

among political geographers that there exists a dividing line which separates our country

(Switzerland) into two mental regions”.

The linguistic diversity of Switzerland dates back to the 7th century, when Germanic

tribes called the Alemanni occupied the northern and eastern part of Switzerland. The

westward movement of the Alemanni in the 7-8th century resulted in the formation of a

language frontier between the German and the French speaking parts that is now called

Roestigraben. This historically determined language border passes through three bilingual

cantons: Valais, Fribourg, and Bern (Figure 3).7 Notably, this within canton variation in

6 See www.bfs.admin.ch 7 Within canton variation in language in the remaining cantons is negligible. For instance, in the Swiss Household Panel comprising thousands of Swiss households, the share of French speakers in the most populous German-speaking canton (Zurich) is a mere 0.006 percent. Similarly, the share of German speakers in the most populous French-speaking canton (Vaud) is only 0.01 percent. The shares are either the same or even smaller in the remaining cantons; in 13 out of 26 cantons, it is even zero.

9

linguistic groups is not commensurate with geographical (Eugster et al. 2012) or genetic

variation (Buhler et al. 2012).8

The Swiss setting thus offers us the possibility to study the association of linguistic

groups with reciprocity, controlling for country and at times canton specific factors. Note that

differences in reciprocity across linguistic groups are unlikely to be due to differences in

language per se because both German and French have Tu and Vos differentiation and are

also no pronoun drop languages (Galor and Özek 2016).

B. Historical Democracy

Switzerland offers a unique setting with respect to variation in historical democracy over

space and time. This variation exists within historical as well as modern cantonal boundaries,

and also within social groups. Moreover, this phenomenon is not restricted to cities but also

includes in its ambit rural areas.

The first Swiss federal constitution offering cantons the rights to extensive self-

governance was adopted in 1848. However, the historical antecedent of these rights date back

to the Middle Ages. Before the 13th century, several noble houses appointed by the Holy

Roman Emperor, such as von Zaehringen, Kyburg, Habsburg, and Savoy, managed large

parts of Switzerland as their feudal property. But starting 13th century, idiosyncratic events,

in particular the extinction of the House of Zaehringen, led to many such areas acquiring

imperial immediacy (Reichsunmittelbarkeit) from the emperor.9 This freed many feudal areas

from the authority of local nobles and offered its residents limited opportunities for self-

governance. Over time, some of these areas managed to bolster self-governance by acquiring

considerable rights and powers, for instance to levy taxes, possess a seal, administer justice,

and appoint their own council and magistrate (Zschokke 1860, McCrackan 1908, Kamm

2017, Landolt 2017a, 2017b, Stadler 2017, Suter 2017, Zahnd 2017). These rights were

defended via the formation of an alliance called the Old Swiss Confederacy, which

comprised 13 members and several allies.10 In contrast, the remaining areas of Switzerland

8 The main geographical border formed by the Alps runs along the southwest-northeast axis, whereas the language divide runs along the north-south axis. Similarly, genetic differentiation in Switzerland besides being very small is not across linguistic groups but geographical boundaries created by the Alps. For this reason we do not include Swiss Italians in our sample, as these are found across the Alps. Another reason is that Swiss Italians are largely confined to a single canton (Ticino). 9 In some cases this was the German king who eventually became the emperor in the following years. 10 The 13 members included the rural cantons of Uri, Schwyz, Unterwalden (Obwalden and Nidwalden), Glarus, Zug, and Appenzell (Inner and Outer Rhodes), and the city cantons of Zurich, Bern, Lucerne, Fribourg, Solothurn, Basel (City and Country), and Schaffhausen.

10

mostly came to be administered as subjugated territories of the Old Swiss Confederacy. This

created a mosaic of areas with and without historical democracy even within cantons, whose

boundaries today are mostly coterminous with cantonal boundaries in the 16th century.

While most members and allies of the Old Swiss Confederacy handled communal

obligations through deliberation and consensus, barring a few exceptions, most subjugated

areas had little say in decision-making. This status remained for the most part uninterrupted

for hundreds of years until the invasion of Switzerland by Napoleon in 1798, which resulted

in the dissolution of the Old Swiss Confederacy and the liberation of its subjugated

territories. The Act of Mediation issued by Napoleon in 1803 made every member and ally of

the Old Swiss Confederacy as well as their subjugated territories full members of Switzerland

and allowed them to have their own representative governments (Frankhauser 2009).

That being said, it would be a mistake to view medieval Switzerland as a place where

modern democratic principles, as in equal rights for all, were enshrined. However, as

McCracken (1908) notes relative to other areas of Europe during the Middle Ages “…early

Swiss were, nevertheless, the best democrats of their day, unconscious, but practical

exponents of the virtues of self-governance” and that “...the Swiss States, both country

districts and towns, were organized upon democratic principles”.

The emergence of historical democracy in the urban and rural areas of Switzerland was

due to idiosyncratic events. In some areas democracy set foot due to the opening of the

Gotthard pass connecting Switzerland to Germany and Italy, which made previously remote

places strategic transit locations for wars against Lombard cities, pope Innocent IV, and to

limit the Habsburg expansion (Heinemann 2003, Schelbert 2014, Stadler 2011, 2017).

However, in most areas it was the extinction of the Zaehringen dynasty from the absence of

an heir, which led to the emergence of historical democracy (McCrackan 1908, Eugster 2015,

Schultheiss 2015). As McCrackan (1908) notes “the extinction of the house of Zaehringen

came most opportunely, for it is entirely within the range of possibility, that, otherwise, the

state they had erected, might have become a principality, or even a monarchy, as enduring as

any of those which surround Switzerland today.”

Broadly speaking, historical democracy in Switzerland was implemented via voting in

public assemblies and election of city councils. In rural areas, such as the cantons of Uri and

Schwyz, eligible male citizens voted directly on laws and decrees in open-air assemblies

called Landsgemeinden (Stadler 2008). This form of democracy was well established by the

14th century in the rural cantons and even survived into modernity (late 19th-20th century)

until the introduction of anonymous voting in all but two rural cantons (Stadler 2008). In the

11

cities, historical democracy involved widening of the power base via limiting steadily the

clout of bishops and aristocrats in the appointment of city councils and via the creation of

large assemblies comprising 200-300 individuals that offered citizens a larger role in

governance (Berner 2006, Holenstein 2014).11

Regardless of the way historical democracy was practiced in Switzerland, it involved

elements of both deliberation as well as constraint on the executive. Involving people to

either vote directly on policies or offering citizens a larger say in decision making via the

institution of greater councils shows stronger presence of deliberation and constraint on the

power of aristocrats (Holenstein 2014). For instance, in one of the public assemblies, a

referendum forbid powerful monasteries from using the common grazing land for free and

ordered them to pay the same tax per cow as local farmers or else be excluded from using the

common (McCrackan 1908). Similarly, in many cities council members were prevented from

holding on to the municipal offices for life or bequeath these to their children (McCrackan

1908, Schultheiss 2015, Zahnd 2017).

Because historical democracy varies within cantons but modern democracy varies at the

cantonal level, we are able to disentangle their effects on reciprocity by introducing cantons

fixed effects. In addition, there is also within group variation in historical democracy, which

allows us to control for group specific differences. In addition, it also lets us construct

falsification tests that investigate whether the gap in reciprocity across Swiss Germans and

Swiss French exists even when both are from municipalities without historical democracy.

III. Data and Descriptive Statistics

We collect data from several different sources. Data to measure reciprocity were collected at

individual household level using a behavioral experiment. This was followed by an in-depth

post-experiment survey with the same individuals to collect data on native language, socio-

demographic characteristics, migration, and family background. These individuals were

selected in a representative manner by the institute for opinion research LINK, the largest

survey agency in Switzerland.

We match these individual level data with data we collected on historical democracy

at the municipal level using the online Historical Lexicon of Switzerland (e-HLS) and a book

by Gasser (1932), current and historical municipality / canton specific covariates from the

11 In the Middle ages, the Swiss city states were much smaller than their Italian counterparts. For instance, in 1600-1700 the population of Zurich was around 8000, while that of Lucerne was 4000.

12

Swiss Federal Statistical Office, data on a competition index by Credit Suisse, data on soil

and climate suitability by Swiss Federal Office for Agriculture12, and data on historical

dynasties on the basis of maps by Ammann and Schib (1958) and Putzger (2004). We refer to

this dataset as our experimental sample. It comprises 262 Swiss individuals covering 174

municipalities from 23 cantons.13 We discuss our sample construction strategy in Appendix

A.I, whereby we show that individuals and municipalities that are in our sample have similar

characteristics as individuals and municipalities that are not (Tables A1-A5). These

characteristics include gender, age, education, household income, religious and political

orientation, altitude, and Gini index of income inequality. In addition, we also use wave 13 of

the Swiss Household Panel (SHP) as an alternative data source. The SHP has 1,859 Swiss

individuals from the same municipalities that are covered in our experimental sample. Note

that SHP does not have experimental measures of reciprocity but values that are closely

connected to reciprocity (see section IV.A). In both the samples, our focus is on Swiss

nationals. Below we describe our measures of social group, historical democracy, and

reciprocity, followed by descriptive statistics.

A. Social Groups

We use the native language(s) of an individual to identify the social group to which an

individual belongs. This was elicited via the post-experiment survey in which multiple

answers were allowed. Individuals could choose from Swiss German, High German, French,

Italian, and other; while choosing the latter individuals had to state the language in an empty

box. Our sample comprises 195 Swiss Germans (74 percent) and 67 Swiss French (26

percent); these shares reflect the share of the two linguistic groups in the Swiss population

excluding Swiss Italians, which are 75 and 25 percent, respectively.14 To further verify that

the native language captures an important dimension of an individual’s social group, we find

that over 90 percent of our respondents identify with the beliefs and values of their linguistic

12 https://map.geo.admin.ch 13 Other than the canton of Ticino, which we deliberately excluded because it is exclusively Swiss Italian speaking, the remaining two excluded cantons are Appenzell-Innerrhoden and Nidwalden - the smallest cantons in Switzerland by population. 14 93 percent of the individuals in our sample (243 individuals) speak only one native language, either Swiss German or Swiss French. Of the remaining 7 percent (19 individuals), 80 percent (15 individuals) speak Swiss German as well as a non-Swiss native language (for example, Russian). We assign these individuals to the Swiss German group. The remaining four individuals speak both Swiss German and Swiss French and are assigned to the group that corresponds with the official language of the canton of birth. Our results are robust even when we assign these individuals to the other group. Note that for 99 percent of the individuals in our sample the native language corresponds with the official language of the municipality.

13

group and that these responses do not differ by groups. In another question, we also

ascertained the extent to which individuals from the two linguistic groups consider

themselves as Swiss and find no difference in this dimension (p-value = 0.75).

B. Historical Democracy

We measure historical democracy at the municipal level, which is the smallest administrative

unit in Switzerland at which individuals live and socially interact. Our primary data sources

for historical democracy are the online Historical Lexicon of Switzerland (e-HLS) and the

study by Gasser (1932). We complement these sources with books on the history of

Switzerland by Zschokke (1860) and McCrackan (1908). Our measures consider both

whether a municipality experienced historical democracy or not, as well as the duration of

this experience. Accordingly, we have two measures:

Experience is a dummy variable, which takes the value of one if a municipality allowed

individuals stronger opportunities for self-governance from the Middle Ages until 1803, zero

otherwise. Table 1 reports summary statistics and shows that 54 percent of the respondents in

our sample are from municipalities with historical democracy.

Duration is a continuous variable, which is measured as the difference in years between 1803

and the date a municipality acquired historical democracy. For the rural areas, we use the

date when Landsgemeinde got established. For the urban areas, we use the date starting

which the city could elect its own council. For some subjugated areas these dates are not

available, so we use the date around which they came to be administered by the members of

the Old Swiss Confederacy or their allies, as this was the time when major changes in self-

governance took place. Table 1 shows that the average duration of historical democracy in

our sample is about 258 years (2.58 hundreds of years).

C. Measuring Reciprocity

Measuring reciprocity using observational data is challenging. In the field, individuals might

behave in a manner that appears to be consistent with reciprocity but is actually due to

benefits from repeated interaction and reputation formation (Fehr and Gächter 2000, Sobel

2005, and DellaVigna 2009). Also, it is plausible that individuals from different social groups

have the same propensity for reciprocity and yet differ in their behavior because of

14

differences in their beliefs about the behavior of others (Fischbacher and Gächter 2010). For

example, in a prisoner’s dilemma, reciprocators from groups with pessimistic beliefs about

the cooperation of others might defect, whereas reciprocators from groups with optimistic

beliefs about the cooperation of others might cooperate, resulting in multiple equilibria. This

could result in the misclassification of reciprocators with pessimistic beliefs as free riders.

These challenges warrant the use of a behavioral experiment.

Following previous studies (Fischbacher et al. 2001, Fischbacher and Gächter 2010), we

invite individuals to take part in a one-shot anonymous public goods game that is

implemented in the strategy method. This allows us to circumvent problems arising from

confounding of reciprocity with other motives and beliefs. This method has been used in

several field settings (see for instance Kocher et al. 2008, Herrmann and Thöni 2009, Rustagi

et al. 2010) and has also been externally validated by Rustagi et al. (2010) and Kosfeld and

Rustagi (2015). The experimental instructions and procedures are in Appendix B.

Behavioral experiment. – In the experiment, two players are randomly assigned to an

experimental group. Each player receives an endowment of 100 CHF (Swiss Francs) and has

to decide on his/her contribution to the public good. Players could contribute any amount

from 0 to 100 in units of 10 CHF. Any amount in the public good is increased by 1.5 times

and then distributed equally between the two players, regardless of their contribution.

Formally, the payoff of player i, where i �{1, 2}, is given by:

(1) Πi

= 100 – Ci + 0.75(C1 + C2),

where 100 is the endowment received at the start of the game, Ci is the contribution of player

i to the public good, 0.75 is the marginal per capita return from the public good, and C1 + C2

is the total contribution to the public good. Given the marginal per capita return, each Swiss

Franc contributed by a player to the public good yields only 0.75 back. Thus, it is

individually rational for a player to contribute nothing to the public good. However, because

2*0.75 > 1, it is socially optimal to contribute the entire endowment. This creates a

cooperation dilemma.

The game involved two decisions: unconditional and conditional. In the unconditional

decision, players decided simultaneously on their contribution to the public good and thus

beliefs play a role. In the conditional decision, we implemented the strategy method, whereby

each player had to decide on his/her contribution for each of the 11 possible contribution

15

decisions of the other player, thereby making beliefs redundant. A die was rolled to

determine the player for whom the conditional decision is relevant, which is then matched

with the unconditional decision of the other player to determine payoffs.

Measures of reciprocity. – If individuals are motivated only by their own payoff then they

should contribute zero in each of the 11 conditional decisions. However, if individuals have a

disposition for reciprocity then they should increase their contribution in response to the

increasing contribution of the other player. Following Fischbacher et al. (2001) and

Fischbacher and Gächter (2010), we use the Spearman correlation between self and the other

players’ contribution in the conditional decision as a measure of an individuals’ reciprocity -

the higher the Spearman correlation the higher is the propensity for reciprocity. The average

propensity to reciprocate in our sample is 0.65 points (s.d. 0.55) (panel C, Table 1).

We also categorize individuals into types following the guidelines proposed by

Fischbacher et al. (2001) and Fischbacher and Gächter (2010). Individuals for whom the p-

value of the Spearman correlation is ≤ 0.001 are classified as “reciprocators”. Individuals

who contribute zero in all the 11 decisions are categorized as “free riders”, those who

contribute 100 in all the decisions as “altruists”, and those who contribute the same amount

that is different from zero and 100 in all the decisions as “flat” contributors. Individuals who

do not fall into any of the above three categories are classified as “other types”. We find that

66 percent of the individuals in our sample are reciprocators, 7 percent are free riders, 4

percent are altruists, 5 percent are flat contributors, and the remaining 18 percent are

unclassifiable “other” types. As an alternative dependent variable, we construct a dummy for

reciprocity, which equals one if an individual is a reciprocator and zero otherwise.

In addition to the experiment described above, we also conducted a second follow up

experiment, which is described in section V.G. One of the two experiments was randomly

selected to determine the payoff.15 After the experiments, individuals took part in an in-depth

post-experimental survey. Both the experiment and the post-experiment survey were pre-

tested for respondents’ understanding of the experiment, questions, and the duration of the

study. We also made sure that native language speakers from within Switzerland wrote the

instructions. In addition, before the actual decision, individuals had to answer three control

questions on game comprehension correctly. We use this to gauge an individuals’

understanding of the experiment and to ensure that we are not simply capturing noise. 15 We pay a random sub-sample of participants following procedures by Bettinger and Slonim (2007). 40 people were randomly selected for payment, of which 50 percent are Swiss Germans and 30 percent Swiss French. On average, subjects earned CHF 135.

16

D. Descriptive Statistics

We present our descriptive results in two steps. First we discuss the correlation between

social groups and historical democracy, followed by the association of reciprocity with social

groups and historical democracy.

Our data show that 67 percent of the Swiss Germans are from municipalities with

historical democracy, but the corresponding share is only 16 percent for Swiss French. When

we consider the duration of historical democracy, we find that it averages 319 years for Swiss

Germans and 82 years for Swiss French. This means that Swiss Germans are nearly four

times more likely to be from municipalities with historical democracy than Swiss French and

also for a longer duration by about 240 years. These differences are highly significant (p-

values < 0.001). The gap in historical democracy across the two groups remains large even

when we control for covariates (Table A6 in Appendix A).

In line with the literature postulating a positive association between democracy and

reciprocity, we expect Swiss Germans to have stronger reciprocity than Swiss French.

Accordingly, we first show in Figure 2a that reciprocity is indeed higher among individuals

from municipalities with historical democracy (0.83 points) than municipalities without (0.42

points). Figure 2b shows that the propensity for reciprocity is much higher among Swiss

Germans (0.73 points) than Swiss French (0.41 points). The magnitude of these differences is

large and significant at the 1 percent level.

We test econometrically the association of reciprocity first with social groups and then

historical democracy in the following sections.

IV. Social Groups and Reciprocity

We tease out systematically the difference in reciprocity across the two social groups using

ordinary least squares (OLS) of the following form:

(2) !!"# = !! + !!!!"!"# + !!!"#!! + !!!"!!!+!!!"#,

where Rimk is the reciprocity of individual i from municipality m in canton k. It is measured as

the Spearman correlation between own and other players’ contribution in the conditional

decision of the public goods game. Our key variable of interest is SG, which is measured as a

binary variable that equals one if an individual i’s native language is Swiss German and zero

otherwise (Swiss French). To ensure that our Swiss German dummy is not capturing the

17

effect of other plausibly correlated variables, we include a number of control variables that

are hypothesized to matter for reciprocity in the literature. X is a vector of individual socio-

demographic characteristics, such as age, education, gender, household income, religion, and

politics. M is a vector of municipality specific variables including altitude and Gini

coefficient for income inequality, and cantonal level GDP per capita. !!"# is an idiosyncratic

error term clustered at the cantonal level. Owing to the small number of clusters (n = 23), the

standard errors could be biased downwards leading to a higher probability of Type I error.

Therefore, we also estimate standard errors using the wild cluster bootstrap-t procedure by

Cameron et al. (2008).

A. Main Results

Table 2 reports results from the estimation of equation 2 (Table A7 in Appendix A shows

coefficients on controls). For the coefficient on the Swiss German dummy, we additionally

report in square brackets p-values obtained using the wild cluster bootstrap procedure.

Column 1 is without control variables and shows that the Swiss German dummy has a

positive coefficient (0.32), which is significant at the 1 percent level. In column 2, we exploit

our rich dataset and control for a host of important individual level covariates. The

coefficient on the Swiss Germany dummy retains its magnitude as well as significance. In

column 3, we additionally account for differences in geography, inequality and economic

environment at municipal and cantonal level. As before, the coefficient on the Swiss

Germany dummy remains remarkably robust. With respect to Swiss French as the benchmark

category, Swiss Germans display stronger reciprocity by 0.29 points. This difference is

economically large, especially given that the average reciprocity among the Swiss French is

0.41 points. It is also nearly one-half of the average reciprocity in our full sample (0.65

points). In monetary terms, for each additional 10 Swiss Francs contributed by the other

player, Swiss Germans contribute 2.1 Swiss Francs more than Swiss French, which is 57

percent of the contribution by Swiss French.16

We implement a number of robustness checks on the association between social groups

and reciprocity. We first show that the gap is not due to differences in cantonal level

institutions. As mentioned before, because within canton variation in linguistic groups occurs

only in the three Roestigraben cantons, we exploit this sub-sample and introduce canton fixed 16 This is computed from a regression of contribution by an individual on the contribution by the other player in the public goods game, after controlling for the full set of covariates. The average contribution for Swiss Germans and Swiss French are 6.1 and 3.7 Swiss Francs, respectively.

18

effects to control for cantonal specific differences in institutions. The results reported in

column 1 of Table A8 shows that the Swiss Germany dummy has a positive coefficient,

which is significant at the 5 percent level. In column 2, when we drop these three cantons

from our sample, the coefficient on the Swiss German dummy turns out to be 0.31 (s.e. 0.07),

which is similar in magnitude and significance to our main result. To mitigate further the

scope of influential cantons, we show that our results hold when we drop the highly

urbanized cantons of Zurich in column 3 and Geneva in column 4. In addition, when we drop

one canton at a time the coefficient on the Swiss German dummy varies from 0.26 to 0.33,

and remains highly significant.

We also reproduce our main results using alternative measures of reciprocity and social

groups in Table A9. We start by using as our dependent variable a dummy for whether an

individual is a reciprocator or not. Column 1 reports the results and shows that Swiss

Germans are, on average, 18 percentage points more likely to have a disposition for

reciprocity than Swiss French. We then change the way we measure social groups by taking

into consideration the extent to which an individual identifies as belonging to one’s own and

other linguistic groups. Following Aron et al. (1991), we show respondents five Venn-like

diagrams with different degrees of overlap between the respondent and the social group,

ranging from 1 (no overlap) to 5 (complete overlap) (see Figure A1, Appendix A). Each

respondent faces four such diagrams, one each for Swiss German, Swiss French, Swiss

Italian, and foreigner. We focus on the ‘degree of Swiss German identity’ and study how this

associates with reciprocity using the ‘degree of Swiss French identity’ as a benchmark, after

controlling for the degrees of Swiss Italian and foreigner identity. Column 2 reports the

results and shows that the coefficient on the degree of Swiss German identity is 0.052, which

is significant at the 5 percent level. A one standard deviation increase in the degree of Swiss

German identity (1.14) is associated with an increase in reciprocity by 0.06 points.

We also show in Tables A10 and A11 that we are not capturing other cantonal and

municipal level differences. These include current share of foreigners, an index of business

competition, and proxies of historical development and human capital. Lastly, we add several

individual level controls in Table A12, including a dummy variable for naturalized Swiss

citizen and whether an individual has migrated within Switzerland or not17, Big Five

personality traits, and game comprehension, measured as the number of correct responses to 17 Migration in our sample occurs only within Switzerland and within a linguistic group, and is therefore not problematic, as individuals are assigned to social groups on the basis of their native language. The only exception is three individuals who have residence across the linguistic groups. Dropping these individuals does not change our results.

19

control questions. Thus far, our measure of reciprocity is unable to distinguish between free

riders, altruists, and flat contributors, as the Spearman correlation is zero for these three

types. We show that our results hold when we drop altruists and flat contributors in column 5

or introduce dummy variables for these two types as additional controls in column 6.

We also reproduce our main results using the wave 13 of the Swiss Household Panel

(SHP) as an alternative data source. We do not have experimental measures of reciprocity for

respondents in this sample, so we use data on values that are associated with reciprocity, such

as cheating on tax declaration, lying in own interest, and claiming state benefits not entitled

to (Knack and Keefer 1997, Guiso et al. 2011)18. Individuals are asked to report the extent to

which they think that each of the three items can be justified on a scale from 0 to 10, where 0

means “never justified” and 10 “always justified”. For the ease of interpretation, we invert

the scale so that a higher score reflects stronger values. Because the three responses are

correlated, we extract their underlying principal component and regress this on the Swiss

German dummy controlling for the same set of covariates as in equation 2. The results are

reported in columns 1-3 of Table A13 and show that without or with controls Swiss Germans

have values that are over 40 percentage points higher than Swiss French and that these

differences are also statistically significant at 1 the percent level.

B. Falsification Tests If the gap in reciprocity between the social groups is capturing differential experience of

historical democracy then it should disappear when historical democracy is altogether

lacking. We test this by comparing Swiss Germans and Swiss French who are from

municipalities without the historical experience of democracy. Column 1 in Table 3 shows

that the gap in reciprocity between Swiss Germans and Swiss French drops from 0.29

(column 3, Table 2) to 0.04 and is no longer statistically significant (p-value = 0.66).19 We

ensure that this result is not due to some peculiarity of our sub-sample in column 2. When we

replace Swiss Germans from municipalities without historical democracy with Swiss

18 Swiss Household Panel does not include the full list of questions on values asked in the World Values Survey, such as accepting a bribe, speeding over the limit, and throw away litter in a public space. 19 We also conduct an analogous test where we compare Swiss French from municipalities with historical democracy but Swiss Germans from municipalities without. If our hypothesis that historical democracy shaped reciprocity is correct then the sign on the Swiss German dummy should flip from positive to negative. We find that this is indeed the case: the coefficient on Swiss German dummy is -0.293 and is even statistically significant. The absolute magnitude of the difference is comparable to the gap we obtain in our main result (Column 3, Table 2). This can be interpreted as suggesting that democracy has a positive association with reciprocity regardless of the social group.

20

Germans from the same canton but from municipalities with historical democracy, the gap in

reciprocity reemerges and is also statistically significant at the 1 percent level. Together these

results confirm that the strong gap in reciprocity across social groups is most likely due to

their differential historical experience of democracy.

V. Historical Democracy and Reciprocity

We examine econometrically the association of reciprocity with historical democracy.

Towards the end of the section, we also discuss reasons behind the persistence of this

association, the emergence of democracy, and alternative interpretations.

The exposure to historical democracy might come from an individuals’ municipality of

residence as well as the municipality of birth. Since for over 90 percent of the respondents

(both Swiss Germans and Swiss French) these two overlap, we present our main results using

measures of historical democracy from the municipality of residence. Subsequently, while

conducting robustness checks, we use the sub-sample of Swiss migrants and present results

that consider measures from the municipality of birth using an epidemiological approach.

Following previous studies that establish the association between historical events and

behavior today (see for instance Tabellini 2010, Nunn and Wantchekon 2011, Voigtländer

and Voth 2012, Alesina et al. 2013, Becker et al. 2016, Guiso et al. 2016), we investigate the

association between historical democracy and reciprocity using the following OLS

specification:

(3) !!"# = !!!+!!!!"!" + !!!"#!! + !!!!!!+!!"!! + !!"# , where R is the reciprocity of individual i from municipality m and canton k, measured as the

Spearman correlation between own and other players’ contribution in the conditional

decision of the public goods game. HD is a measure of historical democracy from the

resident municipality. The coefficient of interest is !!, which captures the association

between an individual’s reciprocity today and historical democracy from his / her resident

municipality. We present results using both the experience of historical democracy and the

duration of this experience.

X and M are vectors of individual and municipality / canton specific controls that are

listed in panel E of Table 1 and are hypothesized to matter for reciprocity in the literature.

These include at the individual level age, education, gender, household income, religion and

politics; altitude and Gini of income inequality at the municipal level; and GDP per capita at

21

the cantonal level. FE is a vector of canton, dynasty, and group fixed effects that capture

canton, dynasty, and group specific factors that may affect reciprocity. Given the potential for

within canton and spatial correlation of errors, we report standard errors that are clustered on

the canton including p-values using the wild cluster bootstrap procedure (Camerer et al.

2008), as well as standard errors adjusted for spatial correlation (Conley 1999).

A. Benchmark Estimates

Table 4 report benchmark estimates without fixed effects on the association of reciprocity

with historical democracy using experience in panel A and duration in panel B (for

coefficients on covariates see Table A14a-b, Appendix A). Below the coefficient on

reciprocity, we additionally report p-values from the wild cluster bootstrap procedure (in

square brackets) and standard errors adjusted for spatial clustering (in curly brackets).

Column 1 is without control variables and shows that the coefficient on experience is 0.41

while that on duration is 0.085, which are significant at the 1 percent level. The coefficients

remain robust in magnitude and significance when we introduce individual level covariates in

column 2 and municipal level variables alongside cantonal level GDP per capita in column 3.

Given that the average reciprocity among individuals from municipalities without historical

democracy is 0.42, the coefficient on experience in column 3 implies that individuals from

municipalities with historical democracy display twice the reciprocity of individuals from

municipalities without. Moreover, one standard deviation increase in duration (2.44) is

associated with a rise in propensity for reciprocity by 0.22 points.20 These estimates are not

due to influential cantons, for when we drop one canton at a time in Table A15, the

coefficient on experience ranges from 0.38 to 0.45 while that on duration from 0.078 to

0.093; they always remain highly significant. These results imply that for each additional 10

Swiss Francs contributed by the other player individuals from municipality with historical

democracy contribute 7.1, whereas individuals from municipalities without contribute 3.6

Swiss Francs, reflecting a difference of 103 percent over the base.

We examine the possibility that other cantonal level differences today as well as in the

past are driving the strong positive association between reciprocity and historical democracy.

Following Alesina et al. (1999) and Francois et al. (2011) who highlight the importance of

20 We also tested for a specification with a quadratic term of duration. While the coefficient on duration remains large and statistically significant, the coefficient on duration squared is very small and statistically insignificant. We conducted similar tests for other cantonal and municipal level variables, such as historical population. As before, our results remain robust whereas the coefficients on the squared terms are small and statistically insignificant.

22

ethnic diversity and competition, we introduce in Table 4 share of foreigners (column 4) and

an index of business competition (column 5).21 Tabellini (2010) shows that values associated

with reciprocity are affected by historical development and historical education. Accordingly,

we consider proxies of these variables from the time when modern Switzerland was found.

Because we do not have measures of GDP per capita from the historical period, we use as our

main proxy the unemployment rate in 1888 (column 6) and consider additional proxies in

Table A16 of Appendix A. These include population from the period before the invasion of

Switzerland by Napoleon in 1798, and measures from 1850 on population and population

density. For proxies of historical education, we include in column 7 of Table 4 enrollment in

primary and secondary schools in 1888. Finally, in column 8, we include the index of modern

democracy constructed by Stutzer (1999) and extended by Fischer (2009), acknowledging

that it is endogenous.22 The motivation is to test whether the effect of historical institutions

on reciprocity today is channelized via modern institutions of democracy or not. The

coefficients on added covariates, such as competition index, unemployment rate, and modern

democracy have the expected sign and are also statistically significant. Nonetheless, the

coefficients on experience and duration remain remarkably robust in both magnitude and

significance. These results suggest that historical institutions of democracy matter for

reciprocity over and above modern institutions despite the fact that the historical institutions

themselves are long gone, and so must have left their mark by shaping values that were

transmitted over time across generations.

B. Fixed Effects Estimates

The above results show a strong positive association between reciprocity and historical

democracy, which is robust to many contemporaneous and historical controls. However, we

cannot rule out that this association is not capturing the effect of a number of other factors

that vary across cantons. In addition, it could be that our estimates are capturing differences

in historical dynasties with which our municipalities were associated in the past. For instance,

Becker et al. (2011) show that even if whole empires themselves perish, they can have long-

lasting effects on trust and corruption. Another possibility is that we are capturing some

systematic differences across social groups. We mitigate these concerns in Table 5 by

21 We use data on locational quality index prepared by Credit Suisse on the attractiveness of Swiss Cantons and economic regions to business (see Holdener et al. 2013). 22 The modern democracy index scores institutions of direct legislation in all the 26 cantons of Switzerland. It is based on a number of requirements on constitutional initiative, statutory initiative, fiscal referendum, and statutory referendum. The index varies from 1-6, where 1 means weak and 6 strong.

23

introducing fixed effects for cantons in panel A, historical dynasties in panels B-C, and social

groups in panels D-E. Each column reports the coefficient on historical democracy from a

separate regression using experience in columns 1-3 and duration in columns 4-6.

Canton fixed effects

Panel A shows the association of reciprocity with historical democracy after controlling only

for canton fixed effects. The coefficient on experience and duration without any additional

individual or municipal level controls are 0.40 and 0.081, respectively, both of which are

significant at the 1 percent level. When we augment this specification with individual level

controls in column 2 and municipal level controls in column 3, the coefficients increase

slightly to 0.42 and 0.09 but remain highly significant. These estimates are very similar to the

ones without canton fixed effects (Table 4) and suggest that canton specific factors are not

driving the association between reciprocity and historical democracy. This is not surprising

after having seen in Table 4 that the coefficients on measures of historical democracy are

robust to the introduction of a variety of important cantonal level variables.

Dynasty fixed effects We consider two different dynasty fixed effects corresponding with two different time

periods: Middle Ages and the period just before the invasion of Switzerland by Napoleon.

In the 13th century, the Holy Roman Emperor placed most areas in Switzerland under the

authority of one of the four major noble houses: Zaehringen, Kyburg, Habsburg, and Savoy.

The remaining areas were either under lesser-known nobles or prince bishoprics or under a

common league / tithing. We assign municipalities in our sample to each of these five

categories using maps by Ammann and Schib (1958) and Putzger (2004) and then investigate

whether the association between reciprocity and historical democracy exists even after

introducing fixed effects for these dynasties. Panel B reports the estimates and shows that

without or with controls the coefficients on experience and duration are positive and highly

significant. In the specification with the full set of controls, the size of the coefficient on

experience is 0.41 (column 3) while that on duration is 0.089 (column 6). These estimates

are, as before, similar to those reported in Table 4 and clearly suggest that our estimates are

not capturing dynasty specific differences from the Middle Ages.

By 1415, Switzerland was mostly free of major noble dynasties. Instead, from this

period onwards, the members and allies of the Old Swiss Confederacy developed a complex

system of dependencies, which were managed either by a single member or jointly by two,

24

three, and at times even eight members. This system lasted until the invasion of Switzerland

by Napoleon in 1798, which led to the dissolution of the Old Swiss Confederacy. We match

each municipality in our sample with the original member or ally with which it was

associated until 1798. Municipalities that were jointly administered by two or more members

are assigned to a category of their own. Panel C shows that in the specification with the full

set of controls the coefficients on experience and duration are 0.38 and 0.082 and retain their

high level of significance.

We also consider a sub-sample of municipalities that were under the rule of the city-state

of Bern (the largest city state north of the Alps covering nearly 25 percent of the Swiss area)

for over 250 years (from 1536-1798). Column 1 of Table A17 shows that the coefficients on

experience (0.58) and duration (0.12) turn out to be slightly larger than our previous

estimates but remain statistically significant at the 1 percent level. Our results also hold when

we confine our sample to individuals from municipalities within the modern cantonal

boundaries of Bern (column 2) or when we drop the city of Bern (column 3).

Group fixed effects If our estimates are capturing some systematic differences across social groups then the scope

of this concern is plausibly larger when the variation in historical democracy that we exploit

is between groups but smaller when it is within groups. Accordingly, we report within group

estimates obtained after controlling for social groups in panel D. In the specification with full

set of controls, the coefficients on experience and duration are 0.38 and 0.081, which are

significant at the 1 percent level. These estimates are remarkably similar to those reported in

Table 4 and suggest that our results are not capturing group specific differences. Panel E

shows that we obtain similar results when we restrict our sample to Swiss Germans only,

which is akin to introducing a Swiss German fixed effect.

Thus far, we have considered each fixed effect at a time. When we introduce all the three

main fixed effects at the same time (canton, dynasty ca. 1200, and social group), the

coefficients on experience and duration turn out to be 0.36 (s.e. 0.07) and 0.077 (s.e. 0.012);

these are highly significant. These results confirm that our benchmark estimates in Table 4

are not capturing differences across cantons, dynasties, and social groups.

C. Additional Municipal and Individual Level Controls

It is assuring that our results are robust to the introduction of a variety of cantonal level

controls and fixed effects. However, this does not rule out the possibility that some other

25

municipality or individual level difference is driving the positive correlation of reciprocity

with historical democracy. We now test whether our results are robust to the inclusion of

additional municipal and individual level control variables. For this purpose, we use the

specification in column 3, Table 4. However, all of our results hold even when we choose

alternative specifications that control for canton or dynasty or group fixed effects.

Table A18 includes additional controls at the municipal level such as the share of

foreigners and an index of business competition, followed by proxies for current and historic

levels of economic development. Because there is no data on GDP per capita at the municipal

level today or in the past, we use current unemployment rate and population density from the

time of founding of modern Switzerland (1850) as proxies.23 Finally, we also consider the

distance of a municipality from the local cantonal capital that was the center of power in the

Middle Ages. The motivation is that during the Middle Ages, the authority of the state in

areas further away from the capital could have been weaker allowing such areas to exercise

more self-governance. Table A19 includes additional controls at the individual level like a

dummy for naturalized Swiss citizen, a dummy for migrant from within Switzerland, Big

Five personality traits, and a measure of game comprehension (number of control questions

answered completely). In both the tables, the coefficients on experience and duration remain

all throughout robust in magnitude and significance. The coefficient on experience is above

0.40 while that on duration stays above 0.08. These results suggest that the positive

association between reciprocity and historical democracy is most likely not capturing the

effect of other municipal and individual level characteristics.

D. Other Robustness Checks

Epidemiological approach. – In Table A20 we present results using measures of historical

democracy from the birth municipality for our sub-sample of migrants. Using an

epidemiological approach (Fernandez 2010, Algan and Cahuc 2014), we show that migrants

from birth municipalities with historical democracy exhibit stronger reciprocity than migrants

from birth municipalities without, after accounting for resident canton fixed effects,

individual and municipal level controls. The coefficients on experience and duration are 0.56

and 0.12, which are slightly larger than the estimates we obtain using the full sample, but are

also highly significant.

23 The oldest population data we have is from 1600-1700, but it is available only for a sub-set of municipalities. When we use this measure, the coefficients on experience and duration remain positive and highly significant.

26

Sub-sample analysis. – In the Middle Ages, historical democracy was not practiced in a

uniform manner in Switzerland but differed largely along the lines of rural and urban areas.

Another distinction that warrants attention is that only male citizens were allowed to

participate in decision-making. Although these differences could have affected reciprocity,

Table A21 shows that the coefficients on experience and duration do not differ by rural-urban

(columns 1-2) or male-female (columns 3-4) categories. In Table A22, we show that our

results hold when we restrict our sample to the three Roestigraben cantons. As before, the

difference is larger than what we obtain in the full sample (column 1) but survives even when

these cantons are dropped (column 2). Finally, we also show in column 3 that altruists and

flat contributors are not driving our results by dropping them altogether from the sample.

Alternative dependent variable. – We also reproduce our main results using a dummy

variable for reciprocity as an alternative dependent variable. Table A23 reports the results

and shows that the coefficients on both experience and duration turn out to be positive and

highly significant. Individuals from municipalities with historical democracy are over 36

percentage points more likely to display a propensity for reciprocity than individuals from

municipalities without. Moreover, one standard deviation increase in duration is associated

with a rise in the likelihood of being a reciprocator by over 19 percentage points. Given that

the share of reciprocators in our sample is 65 percent, these magnitudes are large.

Selection on unobservables. – In addition for the specification with the full set of controls

(column 3, Table 4), we perform a bounding exercise to consider the sensitivity of the

findings to unobserved selection as proposed by Oster (2016). We find that the selection on

unobservables would have to be over two times as large as the selection on observables to

zero out the estimated effect.

E. Results using Swiss Household Panel

In Table A24, Appendix A we reproduce our main results from Table 4 using data from the

Swiss Household Panel. Note that we use as our dependent variable the principal component

of values related to reciprocity, such as whether it is justifiable to cheat on tax declaration,

lye in own interest, and claim state benefits not entitled to. Our results show that without or

with controls there exists a strong positive and statistically significant association of the

principal component of values with experience (panel A) and duration (panel B) of historical

democracy. The magnitude of the coefficient on experience implies that with respect to

27

municipalities without the historical experience of democracy, values are higher on average

by 32 percentage points in areas with experience. Similarly, a one standard deviation increase

in duration is associated with an increase in the principal component of values by 0.15

percentage points. These results hold even when we introduce different fixed effects.

F. Discussion

Why did some areas acquire democracy but others did not? As discussed in section II,

historical circumstances under which the municipalities acquired democracy were often

idiosyncratic. As we discuss below, these cast doubts on reverse causality from reciprocity to

democracy. In particular, one historical circumstance – the extinction of the House of

Zaehringen – offers us quasi-experimental variation in historical democracy. We use this

event to report intention to treat (ITT) and instrumental variable estimates (IV), whereby we

use the extinction of the Zaehringen as an instrument for historical democracy.

The Zaehringen were among the powerful noble dynasties in the Middle Ages that

controlled large swathes of land in Switzerland. But, the dynasty came to an abrupt end in

1218 when its last duke died of natural causes without an heir. This led the German king to

grant imperial immediacy to areas under the Zaehringen rule. Historians consider this to be a

watershed event that gave municipalities the impetus to move towards democracy (Zschokke

1860, McCrackan 1908, Eugster 2015). For instance, Eugster (2015) points out that the

extinction of the Zaehringen “…served as an essential prerequisite for the tendency towards

more municipal autonomy of the 13th and 14th century.”

Though the timing of the extinction of the Zaehringen is plausibly exogenous, the

Zaehringen rule in itself is not. Therefore, any pre-existing differences across areas with and

without the Zaehringen rule could induce selection bias. The bias is expected to be weaker if

the Zaehringen were assigned these areas than when these were selectively acquired by the

Zaehringen themselves. Although historical records concur that emperors Henry IV and

Lothair assigned Zaehringen the territories, this argument holds water as long as the emperors

themselves did not grant the Zaehringen more productive areas. We believe this is highly

unlikely because favoring Zaehringen over other contemporary dynasties could have resulted

in a rift with the nobility, whose support the emperors needed in the Middle Ages.

Nevertheless, we test for the scope of pre-existing differences by comparing

municipalities that were under the Zaehringen rule with municipalities that were under other

dynasties that ruled concurrently on the Swiss plateau. Bearing in mind that in the Middle

28

Ages, pre-existing differences are likely to be based on factor endowments in agriculture, we

follow Alesina et al. (2013) and Galor and Özak (2016) and consider a number of proxies

reflecting crop suitability. These include municipal level climate and soil suitability indices

for a variety of cereal and fodder crops that could have been grown in Switzerland in pre-

1500 period. The former captures differences in cultivation options on the basis of climatic

conditions, while the later captures different elements of the landscape characterized by

bedrock, slope and gradient. The data for these indices were obtained from the Swiss Federal

Office for Agriculture. Table A25 reports the results and shows that there is no difference in

either climate (column 1) or crop suitability (column 2) across the dynasties. We further test

these results by comparing two additional municipal level characteristics: average altitude

and share of waste / rugged land. Columns 3-4 report the results. As before, there is no

difference in any of these characteristics between municipalities from different dynasties.

This evidence can be interpreted as suggesting that pre-existing differences in agricultural

productivity and geographical attributes across areas with and without the Zaehringen rule

were most likely lacking.

We start by reporting intention-to-treat (ITT) estimate in Table A26. Column 1

includes our full set of controls and shows that the coefficient on the Zaehringen dummy

turns out to be 0.12 and is significant at the 5 percent level.24 The size of the coefficient

implies that individuals from municipalities that were associated with Zaehringen rule in the

past have higher reciprocity by 0.12 points than individuals from municipalities that were

associated with other dynasties.

The instrumental variables estimates of the effect of historical democracy on

reciprocity require that the Zaehringen rule did not have any direct effect on reciprocity. We

offer two pieces of evidence in support of this. First, once we directly control for historical

democracy via experience in column 2 and duration in column 3 of Table A26, the

coefficient on Zaehringen dummy drops considerably in magnitude from 0.12 (column 1) to

0.008 (column 2) and -0.02 (column 3); it is also now no longer statistically significant. In

contrast, the coefficients on experience and duration remain robust in magnitude and

significance. Second, if being under the Zaehringen rule itself led to higher reciprocity then

we should observe a positive and significant association between the Zaehringen dummy and

reciprocity even when historical democracy is lacking. Instead, as Figure A2 shows the

difference in reciprocity across dynasties is small and statistically insignificant. A regression- 24 Our results hold even when we control for other dynastic dummies. In this case, the coefficient on Zaehringen dummy is 0.15 and is significant at the 10 percent level.

29

based test confirms this and shows that the coefficient on Zaehringen dummy is not

significantly different from the coefficients on Kyburg and Habsburg dummies (p-value =

0.64), casting doubts that the Zaehringen rule was special relative to other dynasties.

Panel A of Table A27 reports first-stage estimates of the association of Zaehringen

dummy with experience in columns 1-2 and duration in columns 3-4. Without or with

controls there is a strong positive association between historical democracy and the

Zaehringen dummy, which is also highly significant. Municipalities with Zaehringen rule are

nearly 30 percentage points more likely to have historical democracy and for a longer

duration by nearly 160 years than municipalities without. Given that 54 percent of the

municipalities in our sample were exposed to historical democracy for 258 years, these

differences are large in magnitude. The F-statistics are also large (> 19), confirming that the

instrument is relevant.

Panel B reports second-stage estimates of the effect of historical democracy on

reciprocity. Both experience and duration have positive coefficients that are also statistically

significant at the 5 percent level. The coefficients in specifications with full set of controls

are 0.45 on experience and 0.076 on duration, which are remarkably similar to their OLS

counterparts in column 3 of Table 4. These results confirm the positive association of

historical democracy with reciprocity.

G. Alternative Interpretations

We rule out the alternative interpretation that the differences in reciprocity across social

groups that we observe is actually due to Swiss French playing an out-group game. Although

in expectation Swiss French are more likely to be matched with Swiss Germans because the

latter form the majority group in Switzerland, our data suggests that this explanation is not at

work. These data comes from a second experiment, which is similar to the experiment

described in section III except for one key difference – we now reveal the linguistic group of

the other player. Specifically, we randomly matched an individual from a linguistic group to

another individual either of the same (in-group) or a different linguistic group (out-group).

For example, some Swiss French were randomly matched with other Swiss French, while the

remaining were randomly matched with Swiss Germans. All individuals who took part in the

first experiment also took part in the second experiment. Our results reveal no difference in

reciprocity when an individual is randomly assigned to an in-group or an out-group

treatment, either among Swiss French (p-value = 0.95) or among Swiss Germans (p-value =

30

0.87). A related concern that Swiss French display lower reciprocity because they are a

minority in Switzerland is also ruled out, as we do not find any difference in reciprocity

across Swiss French from cantons where they are in absolute majority (Vaud, Neuchatel,

Geneva, and Jura) to cantons where they are in relative majority (Fribourg and Valais) or

where they are in minority (Bern) (p-value = 0.69).

H. Plausible Channel

What could have led to the persistence of the effect of historical democracy on reciprocity

even until today? One plausible channel is the intergenerational transmission of values,

which could have led to the formation of distinct group specific cultures (Bisin and Verdier

2011, Algan and Cahuc 2014). Our results from the epidemiological approach already

suggest that reciprocity persists even when individuals move. In this section, we investigate

the role of family background in the transmission of reciprocity.

Our data does not allow us to test directly for intergenerational transmission, as we do

not observe the reciprocity of parents and grandparents in the experiment. So, we investigate

whether our measure of reciprocity changes in response to changes in the degree of parental

and grandparental linguistic background. Bisin and Verdier (2011) posit three distinct

processes for the transmission of values from parents to children: direct socialization of

children by parents, indirect socialization via parents choosing the social environment of their

children (school and neighborhood), and assortative mating. We focus on the combined effect

of the three processes because of high correlation among them.25

To proxy for the family background of an individual, we use two dimensions: the

linguistic region in which individuals’ parents or grandparents were born (region of birth)

and spent most of their time (region of stay).26 Data were collected via the post-experimental

survey, where individuals could choose from the following options: Swiss German, Swiss

French, Swiss Italian, and other (outside Switzerland). We build a quantitative score for each

individual to measure the strength of parental / grandparental background an individual is

exposed to without taking the individuals’ language into consideration. For the parental

background, the scoring rule is such that each individual can have from zero to four points

25 For instance, parents’ / grandparents’ region of birth and region of stay can be used as proxies for direct and indirect socialization, respectively. In our sample, the correlation between region of birth and region of stay is 0.89 for grandparents, and 0.84 for parents. Similarly, by comparing mothers’ and fathers’ regions of birth and stay, we could also infer assortative mating. The correlation is 0.99 between their regions of stay and 0.76 between their regions of birth. 26 Unfortunately, we do not have these data on the municipality of parents and grandparents.

31

(maximum two points each from mother’s and father’s regions of birth and stay). For the

grandparental background, each individual can have from zero to eight points (maximum

four points each from maternal grandparents’ and paternal grandparents’ regions of birth and

stay). The higher the score, the higher is the exposure an individual has to the linguistic

background of parents and grandparents. Because of little overlap, the Swiss German and

Swiss French family backgrounds are strongly negatively correlated with each other.27 In line

with our previous analysis, we report results using the Swiss German parental and

grandparental background and hypothesize these to have a positive association with

reciprocity. An additional advantage of this approach is that it allows us to address the

concern arising from differences in pure and mixed heritage across linguistic groups.

We estimate the association of reciprocity separately with parental and grandparental

background. Columns 1-2 in Table 6 report the results using parental and grandparental

background respectively. Because parental and grandparental estimates use different scales,

we also report standardized coefficients for easy comparison in the row below the

unstandardized coefficients. We find that the stronger the Swiss German family background,

the stronger is reciprocity among individuals. A one standard deviation increase in Swiss

German parental background (1.71) and Swiss German grandparental background (3.30) is

associated with an increase in reciprocal behavior by 0.10 and 0.07 points, respectively.28

These results can also be broadly interpreted as demonstrating the role of

intergenerational transmission in the persistence of reciprocity over time.

VI. Conclusions

Evidence in economics suggests large variation in reciprocity across social groups and its

implications for a variety of economic outcomes. Yet, our understanding of the determinants

of reciprocity and how it is fostered is still poor. We investigate the association of historical

democracy with reciprocity today and also shed some light on plausible mechanisms that

could explain the emergence of historical democracy in the Middle Ages and the persistence

of its effect on reciprocity over time. 27 Only nine individuals have an overlap in Swiss German and Swiss French parental background, and 33 individuals in grandparental background. 28 We believe that this difference in transmission of reciprocity across generations is due to differences in historical democracy. Consequently, we study whether the association still holds when we restrict our sample to those municipalities that were not exposed to historical democracy. The results show that the coefficients on parental as well as grandparental background disappear altogether and are close to zero in magnitude. This is despite the fact that in this sample Swiss Germans have a stronger Swiss German grandparental and parental background by 5.6 and 3.38 points than Swiss French (out of a maximum possible is 8 and 4).

32

Our study takes place in Switzerland, whereby we exploit variation in historical

democracy over space and time and match this with variation in linguistic social groups.

Reciprocity is elicited using a one-shot anonymous public goods game in the strategy method

to control for benefits from repeated interaction, reputation formation, as well as beliefs

about the contribution of others.

We find that the linguistic social groups differ in their exposure to historical democracy:

Swiss Germans are four times more likely to be from municipalities with historical

democracy than Swiss French and also for longer duration. In line with this difference, our

first set of results show a large gap in reciprocity across social groups: Swiss Germans

display significantly higher reciprocity than Swiss French. Moreover, the gap disappears

completely when we compare Swiss Germans and Swiss French from municipalities without

historical democracy. We find a strong positive association between historical democracy and

reciprocity, which holds even when we control for a variety of fixed effects including

cantons, dynasties, and social groups.

In addition, we exploit the extinction of the Zaehringen dynasty from the absence of an

heir as a plausibly exogenous shock to show a strong positive association between historical

democracy and the Zaehringen rule, as well as between historical democracy and reciprocity

today. Lastly, we also offer suggestive evidence on the role of intergenerational transmission

in the persistence of these effects by showing that stronger Swiss German parental and

grandparental background is associated with stronger disposition for reciprocity. Our findings

are in line with previous studies that document, inter alia, a strong and persistent effect of

historical experiences on preferences and beliefs today.

33

REFERENCES

Aidt, T. S., and R. Franck. 2015. “Democratization Under the Threat of Revolution:

Evidence From the Great Reform Act of 1832.” Econometrica, 83, 505-547.

Alesina, A., R. Baqir, and W. Easterly. 1999. “Public Goods and Ethnic Divisions.”

Quarterly Journal of Economics, 114, 1243-1284.

Alesina, A., P. Giuliano, and N. Nunn. 2013. “On the Origins of Gender Roles: Women and

the Plough.” Quarterly Journal of Economics, 128(2), 469-530.

Algan, Y., and P. Cahuc. 2014. “Trust, Growth and Well-being: New Evidence and Policy

Implications,” In S. N. Durlauf and P. Aghion (eds.), Handbook of Economic Growth,

Volume 2, 49-120.

Ammann, H., and K. Schib. 1958. Historischer Atlas der Schweiz, Aarau.

Aron, A., E. N. Aron, M. Tudor, and G. Nelson. 1991. “Close Relationships as Including

the Other in the Self.” Journal of Personality and Social Psychology, 60, 241-253.

Bandiera, O., I. Barankay, and I. Rasul. 2005. “Social Preferences and the Response to

Incentives: Evidence from Personnel Data.” Quarterly Journal of Economics, 120(3), 917-

962.

Bardhan, P. 2000. “Irrigation and Cooperation: An Empirical Analysis of 48 Irrigation

Communities in South India.” Economic Development and cultural change, 48, 847-865.

Becker, S., O. K. Boeckh, C. Hainz, and L. Woessmann. 2016. “The Empire Is Dead,

Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy.”

Economic Journal, 126(590), 40-74.

Berner, H. 2006. “Grosser Rat (Ancien Regime)”. Historisches Lexikon der Schweiz (31

January).

Bettinger, E. and R. Slonim. 2007. “Patience in Children: Evidence from Experimental

Economics.” Journal of Public Economics, 91(1-2), 343-363.

Bisin, A. and T. Verdier. 2011. “The Economics of Cultural Transmission and

Socialization.” In J. Benhabib, A. Bisin, and M. Jackson (eds.), Handbook of Social

Economics, Volume 1A, 339-416. The Netherlands: North-Holland.

Bolton, G. E. and A. Ockenfels. 2000. “ERC: A Theory of Equity, Reciprocity and

Competition.” American Economic Review, 90, 166-193.

Bowles, S., and H. Gintis. 2002. “The Inheritance of Inequality.” Journal of Economic

Perspectives, 16(3), 3-30.

34

Bowles, S., and S. Polania-Reyes. 2012. “Economic Incentives and Social Preferences:

Substitutes or Complements?” Journal of Economic Literature, 50, 368-425.

Buhler, S., J. M. Nunes, G. Nicoloso, J. M. Tiercy, and A. S. Mazas. 2012. “The

Heterogeneous HLA Genetic Makeup of the Swiss Population.” PLOS One, 7, 1-12.

Cameron, C., J. B. Gelbach, and D. L. Miller. 2008. “Bootstrap-baased Improvements for

Inference with Clustered Errors.” Review of Economics and Statistics, 90(3), 414-427.

Clots-Figueras, I. and P. Masella. 2013. “Education, Language and Identity.” Economic

Journal, 123, F332–F357.

Clyne, M. 1995. The German Language in a Changing Europe. Cambridge: Cambridge

University Press.

Conley, T. G. 1999. “GMM Estimation with Cross Sectional Dependence.” Journal of

Econometrics, 92, 1–45.

Dal Bo, P., A. Foster, and L. Putterman. 2010. “Institutions and Behavior: Experimental

Evidence on the Effects of Democracy.” American Economic Review, 100, 2205-2229.

DellaVigna, S. 2009. “Psychology and Economics: Evidence from the Field.” Journal of

Economic Literature, 47, 315-372.

Dufwenberg, M. and G. Kirchsteiger. 2004. “A Theory of Sequential Reciprocity.” Games

and Economic Behavior, 268-298.

Eugster, E. 2015. “Zähringen, von” Historisches Lexikon der Schweiz (1 January).

Eugster, B., R. Lalive, A. Steinhauer, and J. Zweimuller. 2011. “The Demand for Social

Insurance: Does Culture Matter?” Economic Journal, 121, 413-448.

Fehr, E. 2009. “On the Economics and Biology of Trust.”Journal of the European Economic

Association, 7, 235-266.

Falk, A. and U. Fischbacher. 2006. “A Theory of Reciprocity.” Games and Economic

Behavior, 54, 293-315.

Fehr, E., and S. Gächter. 2000. “Fairness and Retaliation: The Economics of Reciprocity.”

Journal of Economic Perspectives, 14, 159-181.

Fehr, E. and K. Schmidt. 1999. “A Theory of Fairness, Competition, and Cooperation,”

Quarterly Journal of Economics, 114, 817-868.

Fernandez, R. 2010. “Does Culture Matter?” In J. Benhabib, A. Bisin and M.O Jackson

(eds), Handbook of Social Economics, Volume 1, 481-510.

Fischbacher, U. and S. Gächter. 2010. “Social Preferences, Beliefs, and the Dynamics of

Free Riding in Public Goods Experiments.” American Economic Review, 100, 541-556.

Fischbacher, U., S. Gächter, and E. Fehr. 2001. “Are People Conditionally Cooperative:

35

Evidence From a Public Goods Experiment.” Economic Letters, 71, 397-401.

Fischer, J. 2009. “Development of Direct Democracy in Swiss Cantons between 1997 and

2003.” MPRA Paper no. 16140.

Francois, P., T. Fujiwara, and T. van Ypersele. 2011. “Competition Builds Trust. Working

Paper. ”

Frankhauser, A. 2009. “Mediationsakte”. Historisches Lexikon der Schweiz (12 August).

Frey, B. S. 1998. “Institutions and Morale: The Crowding-out Effect.” In A. Ben-Ner and L.

Putterman (eds.), Economics, Values, and Organization, 437-460. New York: Cambridge

University Press.

Frey, B. S., and S. Meier. 2004. “Social Comparisons and Pro-social Behavior: Testing

“Conditional Cooperation” in a Field Experiment.” American Economic Review, 94, 1717-

1722.

Galor, O. and Özak, O. 2016. “The Agricultural Origins of Time Preferences.”American

Economic Review, 106, 3064-3103.

Gasser, A. 1932. Die Territoriale Entwicklung der Schweizerischen Eidgenossenschaft 1291-

1797. Aarau: Sauerlaender.

Giles, H. and P. Johnson. 1987. “Ethnolinguistic Identity Theory: A Social Psychological

Approach to Language Maintenance.” International Journal of the Sociology of Language,

68, 69–99.

Grossjean, P. 2014. “A History of Violence: The Culture of Honor and Homicide in the US

South.” Journal of the European Economic Association, 12, 1285-1316.

Guiso, L., P. Sapienza, and L. Zingales. 2011. “Civic Capital as the Missing Link”, In J.

Benhabib, A. Bisin, and M. Jackson (eds.), Handbook of Social Economics, Volume 1A, 339-

416. The Netherlands: North-Holland.

Guiso, L., P. Sapienza, and L. Zingales. 2016. “Long Term Persistence.” Journal of the

European Economic Association, 14(6), 1401-1436.

Gumperz, J. J. 1982. Language and Social Identity. Cambridge: Cambridge University

Press.

Heinemann, H. 2003. “Friedrich II”, Historical Lexicon of Switzerland (May 19).

Herrmann, B. and C. Thöni. 2009. “Measuring Conditional Cooperation: A Replication

Study in Russia.” Experimental Economics, 12, 87-92.

Holdener, V., F. Hürzeler, T. Rühl, A. Schnell, and N. Sydow. 2013. “Locational Quality

of the Swiss Cantons and Regions.” Credit Suisse Global Research. Special Issues Regions,

September.

36

Holenstein, A. 2014. “Räte”. Historisches Lexikon der Schweiz (9 December).

Jha, S. 2013. “Trade, Institutions and Ethnic Tolerance: Evidence from South Asia.”

American Political Science Review, 107, 806-832.

Kamm, R. 2017. “Glarus (Kanton): Kommunale Bewegung und Staatlichkeit”, Section

2.2.4, Historisches Lexikon der Schweiz (30 May).

Knack, S. and P. Keefer. 1997. “Does Social Capital Have an Economic Payoff? A Cross-

Country Investigation.” Quarterly Journal of Economics, 112, 1251-1288.

Kocher, M. G., T. Cherry, S. Kroll, R. J. Netzer, and M. Sutter. 2008. “Conditional

Cooperation on Three Continents.” Economics Letters, 101, 175-178.

Kosfeld, M., and D. Rustagi. 2015. “Leader Punishment and Cooperation in Groups:

Experimental Field Evidence from Commons Management in Ethiopia.” American

Economic Review, 105, 747-783.

Landolt, O. 2017a. “Schwyz (Kanton): Die Entstehung des Landes Schwyz”, Section 2.2,

Historisches Lexikon der Schweiz (26 June).

Landolt, O. 2017b. “Schaffhausen (Gemeinde): Herrschaft, Politik, und Verfassung vom

Hochmittelalter bis zum Ende des 18 Jahrhundert”, Section 2, Historisches Lexikon der

Schweiz (26 June).

Lowes, S., N. Nathan, J. A. Robinson, and J. Weigel. 2017. “The Evolution of Culture and

Institutions: Evidence from the Kuba Kingdom,” Econometrica, 85(4), 1065-1091.

McCrackan, W. D. 1908. The Rise of the Swiss Republic: A History. New York: Henry Holt

and Company.

Nunn, N., and L. Wantchekon. 2011. “The Slave Trade and the Origins of Mistrust in

Africa.” American Economic review, 101, 3221-3252.

Oster, E. 2016. “Unobservable Selection and Coefficient Stability: Theory and Evidence,”

Journal of Business & Economic Statistics, 1-18.

Ostrom, E., J. Burger, C. B. Field, R. B. Norgaard, and D. Policansky. 1999. “Revisiting

the Commons: Local Lessons, Global Challenges.” Science, 284, 278-282.

Platteau, J.-P. 2000. Institutions, Social Norms, and Economic Development. Academic

Publishers & Routledge.

Putnam, R., R. Leonardi, and R. Y. Nanetti. 1993. Making Democracy Work: Civic

Traditions in Modern Italy. New York: Simon & Schuster.

Putzger. 2004. Historischer Weltatlas, Schweizer Ausgabe, Berlin.

Rodrik, D. 2000. “Do Democratic Transitions Produce Bad Economic Outcomes.” American

Economic Review Papers and Proceedings, 95, 50-55.

37

Rustagi, D., S. Engel, and M. Kosfeld. 2010. “Conditional Cooperation and Costly

Monitoring Explain Success in Forest Commons Management.” Science, 330, 961-965.

Schelbert, L. 2014. Historical Dictionary of Switzerland. Second Edition. Rowman &

Littlefield, UK..

Schultheiss, M. 2015. “Zürich (Gemeinde): Die Stadt wird Selbständig”, Section 2.1,

Historisches Lexikon der Schweiz (25 January).

Sobel, J. 2005. “Interdependent Preferences and Reciprocity”. Journal of Economic

Literature, XLIII, 392-436.

Stadler, H. 2008. “Landsgemeinde” Historisches Lexikon der Schweiz (11 November).

Stadler, H. 2011. “Schöllenen”. Historisches Lexikon der Schweiz (11 April).

Stadler, H. 2017. “Uri (Kanton): Die Entstehung des Landes Uri und die Eidgenossenschaft

im Spätemittelater”, Section 2.2, Historisches Lexikon der Schweiz (22 May).

Stutzer, A. 1999. “Demokratienindizes für die Kantone der Schweiz.” Working Paper 23,

University of Zurich.

Suter, M. 2017. “Zürich (Kanton): Herrschaft, Politik, und Verfassung vom Hochmittelalter

bis zum Ende des 18 Jahrhundert”, Section 2, Historisches Lexikon der Schweiz (30 May).

Sutter, M., S. Haigner, and M. Kocher. 2010. “Choosing the Carrot or the Stick:

Endogenous Institutional Choice in Social Dilemma Situations.” Review of Economic

Studies, 77, 1540-1566.

Tabellini, G. 2010. “Culture and Institutions: Economic Development in the Regions of

Europe.” Journal of the European Economic Association, 8, 677-716.

Uslaner, E. 2003. “Trust, Democracy and Governance: Can Government Policies Influence

Generalized Trust?” In M. Hooghe and D. Stolle (eds.), Generating Social Capital: Civil

Society and Institutions in Comparative Perspective, Houndmills: Palgrave Macmillan.

Voigtländer, N., and H. J. Voth. 2012. “Persecution Perpetuated: The Medieval Origins of

Anti-Semitic Violence in Nazi Germany.” Quarterly Journal of Economics, 127, 1339-1392.

Zahnd, U. M. 2017. Bern (Kanton): Kommunale Bewegung und Territorialbildung im

Spätemittelalter”, Section 2.2, Historisches Lexikon der Schweiz (29 May).

Zschokke, H. 1860. History of Switzerland. Translated by Shaw, F.G. New York: Hurst and

Company Publishers.

38

TABLE 1: SUMMARY STATISTICS

Sample Mean Standard Deviation Panel A: Social groups Swiss German dummy 0.744 0.437 Panel B: Historical democracy Experience (dummy) 0.542 0.50 Duration (hundreds of years) 2.583 2.445 Panel C: Reciprocity Reciprocity 0.646 0.545 Panel D: Family background Parental Swiss German background 2.775 1.709 Grandparental Swiss German background 5.233 3.305 Panel E: Covariates Individual level Age 43.905 13.500 University degree 0.450 0.499 Male 0.538 0.499 Log household income 11.602 0.532 Catholic 0.321 0.468 Protestant 0.363 0.482 Left wing 0.111 0.314 Center 0.607 0.489 Municipality / canton level Gini income 0.293 0.058 Altitude 6.260 2.951 GDP per capita 75.423 20.972 Observations 262 Notes. Swiss German dummy refers to the proportion of individuals whose native language is Swiss German. Experience is a dummy variable equal to one if an individual lives in a municipality that experienced historical democracy before 1803, zero otherwise. Duration refers to the number of hundreds of years an area was exposed to historical democracy before 1803. Reciprocity is measured using a public goods game. The parental Swiss German background is a score from zero to four, reflecting the degree to which the parental region of birth and region of stay is Swiss German speaking. Similarly, grandparental Swiss German background is a score from zero to eight, reflecting grandparental region of birth and region of stay. Age is measured in number of years. Male is a dummy variable equal to one if the individual is male, zero otherwise. University degree is a dummy variable equal to one if the individual has a university degree, zero otherwise. Log household income is the log of annual household income / 1000. Catholic and protestant are dummy variables indicating the religion of an individual. Left wing and center are dummy variables referring to the political orientation of an individual. Altitude is the mean elevation of the municipality in meters / 100. Gini income is a measure of income inequality at the level of resident municipality. GDP per capita is at the cantonal level and is measured in 1000s of Swiss Francs. The number of observations for the variable parental Swiss German background is 253 and grandparental Swiss German background is 249 because of missing answers to the corresponding questions.

39

TABLE 2: SOCIAL GROUPS AND RECIPROCITY

Dependent variable: Reciprocity No controls

(1)

Individual controls

(2)

Full set of controls

(3) Swiss German 0.319*** 0.316*** 0.291*** (0.070) (0.069) (0.068) [0.000] [0.000] [0.000] Individual controls No Yes Yes Municipal controls No No Yes GDP per capita No No Yes Observations 262 262 262 R-squared 0.07 0.10 0.11 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. Square brackets report p-values from the wild cluster bootstrap procedure proposed by Cameron et al. (2008) with 1,000 replications. Table A7 in Appendix A reports coefficients on covariates. *** indicate significance at the 1% level.

TABLE 3: SOCIAL GROUPS AND RECIPROCITY: FALSIFICATION TEST

Dependent variable: Reciprocity

Swiss French and Swiss Germans from municipalities without historical democracy

(1)

Swiss French from municipalities without but Swiss Germans with

historical democracy (2)

Swiss German 0.042 0.507*** (0.095) (0.061)

[0.637] [0.000] Individual controls Yes Yes Municipal controls Yes Yes GDP per capita Yes Yes Observations 120 152 Number of cantons 14 14 R-squared 0.15 0.28 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. Square brackets report p-values from the wild cluster bootstrap procedure proposed by Cameron et al. (2008). Column 1 compares differences in reciprocity across Swiss Germans and Swiss French from municipalities without historical democracy. Column 2 replaces Swiss Germans from municipalities without historical democracy with Swiss Germans from municipalities with historical democracy but from the same canton. Individual and municipal level controls include the variables listed in Panel E of Table 1. *** indicates significance at the 1% level.

40

TABLE 4: HISTORICAL DEMOCRACY AND RECIPROCITY

Dependent variable: Reciprocity No

controls (1)

Individual controls

(2)

Municipal controls

(3)

Share of foreigners

(4)

Comp. index

(5)

Unemploy-ment 1888

(6)

Schooling 1888 (7)

Modern democracy

(8) Panel A: Experience

Historical democracy 0.410*** (0.045) [0.000] {0.064}

0.405*** (0.055) [0.000] {0.070}

0.424*** (0.056) [0.000] {0.070}

0.433*** (0.062) [0.000] {0.074}

0.396*** (0.056) [0.000] {0.069}

0.407*** (0.057) [0.000] {0.074}

0.416*** (0.061) [0.000] {0.074}

0.409*** (0.055) [0.000] {0.068}

Share of foreigners 0.002 (0.004)

Competition index 0.056*** (0.019)

Unemployment 1888 -2.468** (0.969)

Primary school 1888 0.141 (0.170)

Secondary school 1888 0.325 (0.429)

Modern democracy 0.028* (0.014)

R-squared 0.14 0.16 0.19 0.19 0.20 0.20 0.19 0.19 Panel A: Duration Historical democracy 0.085***

(0.008) [0.000] {0.013}

0.084*** (0.011) [0.000] {0.015}

0.089*** (0.011) [0.000] {0.014}

0.091*** (0.012) [0.000] {0.015}

0.084*** (0.011) [0.000] {0.014}

0.086*** (0.011) [0.000] {0.015}

0.087*** (0.012) [0.000] {0.015}

0.086*** (0.010) [0.000] {0.014}

Share of foreigners 0.003 (0.004)

Competition index 0.046** (0.018)

Unemployment 1888 -2.193* (1.091)

Primary school 1888 0.068 (0.176)

Secondary school 1888 0.196 (0.448)

Modern democracy 0.034** (0.013)

R-squared 0.14 0.17 0.20 0.20 0.20 0.20 0.20 0.20 Individual controls No Yes Yes Yes Yes Yes Yes Yes Municipal controls No No Yes Yes Yes Yes Yes Yes GDP per capita No No Yes Yes Yes Yes Yes Yes Observations 262 262 262 262 262 262 262 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. We additional report in square brackets p-values from wild cluster bootstrap procedure (Cameron et al. 2008) and in curly brackets standard errors adjusted for spatial clustering with a threshold of 100 Km (Conley 1999). Our results are robust to alternative thresholds at 10, 25, 50, and 200 km. Columns 4-8 introduce additional controls at the cantonal level. These are current share of foreigners in column 4 and competition index in column 5; unemployment rate in 1888 in column 6, school enrollment in 1888 in column 7, and index of modern democracy in column 8. Data on share of foreigners, unemployment rate and school enrollment in 1888 are from the Swiss Federal Statistical Office, and on competition index by Credit Suisse (see Holdener 2013). The index of modern democracy is from 2003. It varies from one to six and is based on studies by Stutzer (1999) and Fischer (2009). Individual and municipal controls include the variables in Panel E of Table 1. Tables A14a-b in Appendix A report coefficients on covariates. ***, **, * indicate significance at the 1%, 5%, and 10% levels, respectively.

41

TABLE 5: HISTORICAL DEMOCRACY AND RECIPROCITY: FIXED EFFECTS ESTIMATION (CANTON, DYNASTY, AND SOCIAL GROUP)

Dependent variable: Reciprocity

Experience Duration

No controls

(1)

Individual controls

(2)

Full set of controls

(3)

No controls

(4)

Individual controls

(5)

Full set of controls

(6) Panel A: Canton fixed effects

Historical democracy 0.405*** 0.412*** 0.418*** 0.081*** 0.082*** 0.088*** (0.052) (0.063) (0.074) (0.010) (0.012) (0.013)

Panel B: Dynasty fixed effects – ca. 1200

Historical democracy 0.369*** 0.366*** 0.414*** 0.078*** 0.077*** 0.089*** (0.038) (0.058) (0.066) (0.006) (0.011) (0.012)

Panel C: Dynasty fixed effects – ca. 1798

Historical democracy 0.396*** 0.401*** 0.377*** 0.083*** 0.083*** 0.082*** (0.060) (0.068) (0.073) (0.009) (0.012) (0.012)

Panel D: Social group fixed effects

Historical democracy 0.356*** 0.353*** 0.384*** 0.074*** 0.073*** 0.081*** (0.032) (0.047) (0.052) (0.006) (0.009) (0.010)

Panel E: Swiss German fixed effect

Historical democracy 0.359*** 0.320*** 0.364*** 0.074*** 0.066*** 0.075*** (0.032) (0.052) (0.053) (0.006) (0.010) (0.010)

Individual controls No Yes Yes No Yes Yes Municipal controls No No Yes No No Yes Fixed effects Yes Yes Yes Yes Yes Yes Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. Each cell reports the coefficient on historical democracy from a separate regression using experience in columns 1-3 and duration in columns 4-6. All columns include fixed effects of the type listed in the panel headline. In panel A, we include fixed effects for cantons. In panel B, we include fixed effects for the dynasties with which our municipalities were associated ca. 1200. In panel C, we include fixed effects taking into consideration cantonal boundaries before the invasion of Switzerland by Napoleon in 1798. In panel D, we control for the Swiss German dummy. In panel E, we exclude Swiss French from the sample and exploit variation in historical democracy only in our Swiss German sub-sample. Individual and municipal controls include the variables in Panel E of Table 1. All panels control for GDP per capita except for panel A because of canton fixed effects. The number of observations in each panel except for panel E is 262. Panel E excludes Swiss French therefore the number of observations is 195. All our results hold when we adjust our standard errors using either the wild cluster bootstrap procedure proposed by Cameron et al. (2008) or spatial clustering following Conley (1999). *** indicates significance at the 1% level.

42

TABLE 6: FAMILY BACKGROUND AND RECIPROCITY

Dependent variable: Reciprocity Parental

background (1)

Grandparental background

(2) Family background 0.060*** 0.021**

(0.017) (0.009) Standardized coefficient 0.10 0.07 Individual controls Yes Yes Municipal controls Yes Yes GDP per capita Yes Yes Observations 253 249 R-squared 0.09 0.08 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. Swiss German background refers to the linguistic region in which an individual’s parents or grandparents were born as well as spent most of their time. Swiss German parental background is a score ranging from zero to four; while Swiss German grandparental background is a score ranging from zero to eight. Individual and municipal level controls are the same as in Panel E of Table 1. ***, ** indicate significance at the 1% and 5% level, respectively.

FIGURE 1: RECIPROCITY AND HISTORICAL DEMOCRACY

Notes. Y-axis plots residuals from a regression of reciprocity on covariates. X-axis plots residuals from a regression of historical experience of democracy on the same covariates. Each point represents an individual.

-2-1

01

2R

esid

uals

of r

ecip

roci

ty o

n co

varia

tes

-1 -.5 0 .5 1Residuals of historical democracy on covariates (experience)

43

FIGURE 2A FIGURE 2B

FIGURE 2: RECIPROCITY BY HISTORICAL DEMOCRACY AND SOCIAL GROUPS

Notes. Y-axis plots reciprocity, measured as the Spearman correlation between self and other players’ contribution in the conditional decision of the public goods game.

FIGURE 3: GEOGRAPHICAL DISTRIBUTION OF SWITZERLAND’S OFFICIAL LANGUAGES Source: Swiss Federal Statistical Office (2000)

0.2

.4.6

.81

Rec

ipro

city

0 1Historical democracy (experience)

0.2

.4.6

.81

Rec

ipro

city

Swiss German Swiss French

! 1

ONLINE APPENDIX

WAITING FOR NAPOLEON?

DEMOCRACY AND RECIPROCITY

ACROSS SOCIAL GROUPS

DEVESH RUSTAGI AND MARCELLA VERONESI

APPENDIX A

I. SAMPLE CONSTRUCTION AND DESCRIPTION

We highlight below the representativeness of our sample at both individual and municipal level.

A. Scope of selection at the individual level

We contacted 1,003 Swiss individual households to take part in our online experiment.1 These

individuals were randomly selected from within each of the three main linguistic groups and the

26 cantons of Switzerland by the institute for opinion research LINK. Of these, 303 individuals

completed our study implying a response rate of 30 percent. We test for the scope of selection by

comparing individuals that did and did not take part in our study along a number of important

covariates. Because our focus is on Swiss Germans and Swiss French we conduct this analysis

by dropping Swiss Italians altogether. This should not affect our results because individuals were

randomly selected from within a linguistic group and Swiss Italians are confined to the canton of

Ticino.2 This leaves us with a final sample of 262 individuals who participated in our study and

627 individuals who did not. Table A1 reports in columns 1-2 the mean of each covariate for

these two groups of individuals. Column 3 reports p-values of the difference estimated using a

regression of socio-demographic characteristics on a dummy variable for participation. It is !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 According to the Swiss Federal Statistical Office (2014), 84 percent of adult German speakers and 82 percent of adult French speakers used Internet in the first quarter of 2014. However, the shares are 100 percent if adult population only up to the age of 50 years is considered. 2 Nonetheless the results do not change even if we include Swiss Italians in the analysis.

! 2

evident from the table that there are no differences in these characteristics across participants and

non-participants mitigating the selection concern.

TABLE A1: SAMPLE COMPARISON AT THE INDIVIDUAL LEVEL

Participants Mean (s.d.)

Non-participants Mean (s.d.) p-value

(1) (2) (3) Age 41.905 40.793 0.267

(13.500) (15.158)

University degree 0.450 0.367 0.139

(0.498) (0.482)

Male 0.538 0.493 0.273

(0.499) (0.500)

Income 125.031 123.895 0.783

(65.161) (72.290)

Catholic 0.321 0.365 0.189

(0.468) (0.482)

Protestant 0.363 0.349 0.656

(0.482) (0.477)

Left wing 0.111 0.094 0.229

(0.314) (0.292)

Centre 0.607 0.603 0.865

(0.489) (0.490)

Gini income 0.293 0.297 0.401 (0.058) (0.065) Altitude 6.260 6.475 0.315 (2.951) (3.264) GDP 75.429 74.215 0.298 (20.968) (18.393) Observations 262 627 Notes. Columns 1-2 report the mean and the standard deviation (s.d.) of the socio-demographic characteristics for the sub-sample of individuals that agreed to participate in our study and those who did not. Column 3 reports p-values from an OLS regression of each socio-demographic characteristic on a dummy variable for participation. Standard errors are estimated using the wild cluster bootstrap procedure (Cameron et al. 2008).

! 3

B. Scope of selection at the individual level within linguistic groups

We also consider the scope of selection within a linguistic group by comparing participants and

non-participants within groups. Table A2 reports the p-value from an OLS regression of socio-

demographic characteristics on a dummy variable for participation within a linguistic group.

With the exceptions of left wing (significant at the 5% level) and Gini coefficient of income

inequality (significant at the 10% level) in the sub-sample of Swiss French, all other differences

are statistically insignificant.

TABLE A2: SAMPLE COMPARISON AT THE INDIVIDUAL LEVEL BY SOCIAL GROUPS

Swiss Germans Swiss French (1) (2)

Age 0.327 0.659

University degree 0.239 0.106

Male 0.102 0.461

Income 0.821 0.964

Catholic 0.281 0.649

Protestant 0.703 0.193

Left wing 0.394 0.027

Centre 0.153 0.151

Gini income 0.731 0.079

Altitude 0.377 0.884

GDP 0.553 0.551

Observations 625 264

Notes. Columns 1-2 report p-values from an OLS regression of each socio-demographic characteristic on a dummy variable for participation. Standard errors are estimated using the wild cluster bootstrap procedure (Cameron et al. 2008).

! 4

C. Scope of selection at the municipal level

Since historical democracy is measured at the municipal level, we also test for selection at the

municipal level. Note that though the municipalities were randomly selected, not all individuals

from initially selected municipalities took part in the study. Therefore, in Table A3 we compare

participants’ municipalities in our sample with non-participants’ municipalities along a number

of important characteristics. The data for these characteristics were obtained using the Swiss

Federal Statistical Office. We find that there are no significant differences in municipality level

characteristics between the two groups.

TABLE A3: SAMPLE COMPARISON AT THE MUNICIPAL LEVEL

Participants’ municipalities

Mean (s.d.)

Non-participants’ municipalities

Mean (s.d.) p-value (1) (2) (3)

Age 20-64 61.824 61.530 0.227

(2.544) (2.720)

Tertiary degree 19.680 20.295 0.399

(6.531) (7.406)

Male 0.498 0.499 0.186

(0.012) (0.013)

Income 125.527 130.286 0.557

(62.144) (68.444)

Catholic 42.574 43.280 0.723

(22.617) (24.258)

Protestant 37.914 38.140 0.873

(21.881) (22.777)

Left wing 25.945 24.721 0.105

(11.357) (10.371)

Centre 39.625 40.139 0.655

(13.042) (12.627)

Gini income 0.285 0.290 0.473 (0.062) (0.071) Altitude 6.572 6.936 0.261 (3.322) (3.884) Observations 174 344 Notes. Columns 1-2 report at the municipal level the mean and the standard deviation (s.d.) of the socio-demographic characteristics for the municipalities of participants and non-participants. Column 3 reports p-values from an OLS regression of each socio-demographic characteristic on a dummy variable for participation. Standard errors are estimated using the wild cluster bootstrap procedure (Cameron et al. 2008). The total number of observations is 518 except for religion and age (512), education (502), male (497), and income (385) because of missing data for some municipalities. Data are from the Swiss Federal Statistical Office, except for income that is from wave 13 of the Swiss Household Panel. Note that we exclude GDP per capita because it is measured at the cantonal level.

! 5

D. Scope of selection at the municipal level within linguistic groups

Table A4 compares participants’ and non-participants’ municipalities within a linguistic group. It

shows that all differences are statistically insignificant.

TABLE A4: SAMPLE COMPARISON AT THE MUNICIPAL LEVEL BY SOCIAL GROUPS

Swiss German municipalities

p-values

Swiss French municipalities

p-values (1) (2)

Age 20-64 0.354 0.305

Tertiary degree 0.940 0.412

Male 0.405 0.105

Income 0.919 0.159

Catholic 0.865 0.776

Protestant 0.763 0.921

Left wing 0.205 0.119

Centre 0.899 0.525

Gini income 0.940 0.229

Altitude 0.358 0.503

Observations 374 144 Notes. Columns 1-2 report p-values from an OLS regression of each socio-demographic characteristic on a dummy variable for participation. Standard errors are estimated using the wild cluster bootstrap procedure (Cameron et al. 2008). The total number of observations is 518 except for religion and age (512), education (502), male (497), and income (385) because of missing data for some municipalities. Data are from the Swiss Federal Statistical Office, except for income that is from wave 13 of the Swiss Household Panel. Note that we exclude GDP per capita because it is measured at the cantonal level.

! 6

E. Scope of selection at the municipal level – comparison with the Swiss Household Panel

We also verify that the municipalities in our sample are not only representative of the originally

randomly selected sample but also of wave 13 (year 2011) of the Swiss Household Panel. Table

A5 shows that there are not significant differences between the two samples.

TABLE A5: SAMPLE COMPARISON AT THE MUNICIPAL LEVEL USING SWISS HOUSEHOLD PANEL

Municipalities in our sample Mean (s.d.)

Municipalities in SHP sample

Mean (s.d.) p-value (1) (2) (3)

Age 48.765 48.533 0.851

(11.702) (13.024)

University degree 0.186 0.162 0.323

(0.293) (0.289)

Male 0.479 0.491 0.433

(0.256) (0.277)

Income 125.761 126.269 0.942

(60.468) (187.063)

Catholic 0.333 0.298 0.173

(0.346) (0.354)

Protestant 0.355 0.366 0.721

(0.335) (0.373)

Left wing 0.158 0.153 0.778

(0.226) (0.258)

Centre 0.179 0.162 0.527

(0.316) (0.300)

Gini income 0.285 0.284 0.880 (0.062) (0.069) Altitude 6.572 7.017 0.172 (3.322) (3.927) Observations 174 1,197 1,371 Notes. Columns 1-2 report the mean of the socio-demographic characteristics for the sample of municipalities in our final sample and in wave 13 of the Swiss Household Panel (SHP), respectively. Column 3 reports p-values from an OLS regression of each socio-demographic characteristic on a dummy variable equal to one if a municipality is in our sample, and zero if a municipality is in wave 13 of the Swiss Household Panel. Standard errors are estimated using the wild cluster bootstrap procedure (Cameron et al. 2008). Note that we exclude GDP per capita because it is measured at the cantonal level.

! 7

II. SOCIAL GROUPS AND HISTORICAL DEMOCRACY

Table A6 shows that Swiss Germans are much more likely to have the historical experience of

democracy and for a longer duration than Swiss French, even after controlling for covariates.

TABLE A6: SOCIAL GROUPS AND HISTORICAL DEMOCRACY

Dependent variable: Historical democracy Experience Duration (1) (2) Swiss German 0.491*** 2.300*** (0.096) (0.516) Other covariates Yes Yes Observations 262 262 R-squared 0.321 0.307 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing and center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. *** indicates significance at the 1% level.

! 8

III. SOCIAL GROUPS AND RECIPROCITY

A. Main results with coefficients on covariates

Tables A7 shows the coefficients on covariates for the main results in columns 1-3 of Table 2 of

the main paper.

TABLE A7: SOCIAL GROUPS AND RECIPROCITY

Dependent variable: Reciprocity No

controls (1)

Individual controls

(2)

Municipal / cantonal controls

(3) Swiss German 0.319*** 0.316*** 0.291*** (0.070) (0.069) (0.068) Age -0.001 -0.000 (0.002) (0.002) University degree 0.101* 0.104* (0.058) (0.054) Male -0.049 -0.046 (0.079) (0.083) Log household income 0.022 0.010 (0.089) (0.087) Catholic -0.001 0.029 (0.066) (0.071) Protestant -0.063 -0.063 (0.090) (0.093) Left wing 0.179 0.164 (0.135) (0.136) Center 0.120 0.119 (0.103) (0.100) Gini income -1.246 (0.772) Altitude -0.002 (0.009) GDP per capita 0.003** (0.001) Constant 0.409*** 0.105 0.405 (0.055) (0.931) (0.970) R-squared 0.066 0.095 0.113 Observations 262 262 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. ***, **, * indicate significance at the 1%, 5%, and 10% levels, respectively.

! 9

B. Additional robustness checks

Tables A8-A12 present additional robustness checks that we conducted on the association

between social groups and reciprocity.

TABLE A8: SOCIAL GROUPS AND RECIPROCITY: ROBUSTNESS CHECKS

Dependent variable: Reciprocity Roestigraben

sample Drop

Roestigraben sample

Drop Zurich

Drop Geneva

(1) (2) (3) (4) Swiss German 0.538** 0.305*** 0.270*** 0.285*** (0.260) (0.063) (0.076) (0.076) Other covariates Yes Yes Yes Yes Observations 62 200 221 252 R-squared 0.273 0.169 0.095 0.113 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. Column 1 includes only Roestigraben cantons (Bern, Fribourg, and Valais). Column 2 excludes Roestigraben cantons. Columns 3 and 4 exclude the cantons of Zurich and Geneva, respectively. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing and center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Column 1 also includes canton fixed effects and therefore excludes GDP per capita. It also excludes left wing orientation because of little variation within a canton. ***, ** indicate significance at the 1% and 5% levels, respectively.

! 10

C. Alternative measures

TABLE A9: SOCIAL GROUPS AND RECIPROCITY: ALTERNATIVE MEASURES

Dependent variable:

Reciprocator Dependent variable:

Reciprocity (1) (2) Swiss German 0.184** (0.072) Degree of Swiss German identity 0.052** (0.025) Other covariates Yes Yes Observations 262 252 R-squared 0.075 0.079 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. In column 1, the dependent variable is a dummy variable equal to one if an individual is a reciprocator, 0 otherwise. Column 2 replaces the Swiss German dummy with the degree of Swiss German identity, which ranges from one to five, where one means that the individual chose the Venn-like diagram corresponding to no overlap with Swiss Germans while five means complete overlap. Column 2 additionally controls for the degree of Swiss Italian and foreigner identities measured in a similar manner. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. The number of observations is lower in column 2 because of missing answers to the questions on the degree of identity.

! 11

Figure A1 illustrates the Venn like diagrams that we used to measure the degree of identity at the

level of an individual for different relevant social groups in Switzerland following Aron et al.

(1991).

FIGURE A1: THE DEGREE OF GROUP IDENTITY

Notes. The figure shows Venn-like diagrams represented by a pair of circles that overlap at different degrees. One circle represents the respondent (“you”) and the other circle a linguistic group (Swiss German or Swiss French or Swiss Italian or foreigner). Respondents face four questions, each depicting a different linguistic group, and they are asked to choose the pair of circles that best represents their degree of identity with a given linguistic group, with possible answers ranging from 1 (no overlap) to 5 (complete overlap).

1 2 3

4 5

You Linguistic

group You Linguistic

group You Linguistic group

You Linguisticgroup

You Linguistic

group

! 12

D. Additional controls at the cantonal level

TABLE A10: SOCIAL GROUPS AND RECIPROCITY:

ADDITIONAL CANTONAL LEVEL CONTROLS

Dependent variable: Reciprocity Share of

foreigners Competition

index Unemployment

1888 Schooling

1888 (1) (2) (3) (4) Swiss German 0.315*** 0.231*** 0.264*** 0.298*** (0.100) (0.069) (0.082) (0.068) Share of foreigners 0.003 (0.006) Competition index 0.054 (0.035) Unemployment 1888 -1.782 (2.796) Primary school 1888 0.213 (0.298) Secondary school 1888 -0.474 (0.625) Other covariates Yes Yes Yes Yes Observations 262 262 262 262 R-squared 0.114 0.116 0.114 0.115 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Columns 1-4 include additional controls at the cantonal level. Column 1 includes the contemporaneous share of foreigners, column 2 an index of competition that is proxied by the attractiveness of the Swiss cantons to business assessed by Credit Suisse (see Holdener et al. 2013); column 3 the unemployment rate in 1888, and column 4 primary and secondary school enrollment in 1888. Data on unemployment and school enrollment in 1888 are from historical data books of Switzerland, while data on contemporaneous share of foreigners is from the Swiss Federal Statistical Office. *** indicates significance at the 1% level.

! 13

E. Additional controls at the municipal level

TABLE A11: HISTORICAL DEMOCRACY AND RECIPROCITY: ADDITIONAL MUNICIPAL LEVEL CONTROLS

Dependent variable: Reciprocity Share of

foreigners Competition

index Unemployment

rate Population

density 1850 (1) (2) (3) (4) Swiss German 0.293*** 0.229*** 0.346*** 0.294*** (0.074) (0.072) (0.069) (0.068) Share of foreigners 0.000 (0.002) Competition index 0.043 (0.031) Unemployment rate 0.024 (0.017) Population density 1850 -0.000 (0.000) Other covariates Yes Yes Yes Yes Observations 262 262 262 259 R-squared 0.113 0.117 0.115 0.114 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing and center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level These variables are described in panel E of Table 1 of the main paper. Columns 1-5 include additional controls at the municipal level. Column 1 includes the share of foreigners; column 2 includes an index of competition that is proxied by the attractiveness of the Swiss cantons to business assessed by Credit Suisse (see Holdener et al. 2013); column 3 includes unemployment rate today; and column 4 includes population density in 1850. The number of observations is lower in column 4 because of missing information on population density in 1850 for three municipalities. *** indicates significance at the 1% level.

! 14

F. Additional individual level controls

TABLE A12: SOCIAL GROUPS AND RECIPROCITY: ADDITIONAL INDIVIDUAL LEVEL CONTROLS

Dependent variable: Reciprocity Naturalized

Swiss citizen Swiss

migrant Big Five Game

comprehension Controls for altruists and

flat contributors

Drop altruists and flat

contributors (1) (2) (3) (4) (5) (6) Swiss German 0.268*** 0.295*** 0.301*** 0.291*** 0.263*** 0.289*** (0.067) (0.071) (0.083) (0.068) (0.067) (0.075) Naturalized Swiss citizen 0.000 Yes Yes (0.076) Migrant -0.043 (0.069) Big Five personality traits [0.994] [joint-p-value] Game comprehension -0.025 (0.083) Altruists -0.689*** (0.061) Flat contributors -0.694*** (0.50) Other covariates Yes Yes Yes Yes Yes Yes Observations 252 262 237 262 262 239 R-squared 0.095 0.114 0.104 0.113 0.234 0.125 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Columns 1-5 include additional controls. Column 1 includes a dummy variable for naturalized Swiss citizens; column 2 includes a dummy variable for individuals who have migrated within Switzerland; column 3 includes the Big Five personality traits at the individual level described in Appendix A.VI; column 4 includes game comprehension measured as the number of correct responses to the control questions described in Appendix B; and column 5 includes dummy variables for altruists and flat contributors. The number of observations is lower in columns 1 and 3 because of missing answers to the questions on naturalized citizen, and Big Five personality traits; and in column 6 because it excludes altruists and flat contributors. *** indicates significance at the 1% level.

! 15

G. Alternative Data Source: Swiss Household Panel Table A13 reproduces our main results using wave 13 of the Swiss Household Panel (SHP) as an

alternative data source. The dependent variable is a principal component of values associated

with reciprocity, such as to what extent it is justifiable to lie in own interest, cheat on taxes, and

claim state benefits not entitled to.

TABLE A13: SOCIAL GROUPS AND VALUES ASSOCIATED WITH

RECIPROCITY: SWISS HOUSEHOLD PANEL

Dependent variable: Principal component of values No controls Individual level

controls Municipal /

cantonal controls (1) (2) (3) Swiss German 0.443*** 0.433*** 0.466*** (0.074) (0.078) (0.072) Individual controls No Yes Yes Municipal / cantonal controls No No Yes Observations 1,901 1,859 1,859 R-squared 0.025 0.082 0.085 Notes. OLS coefficients with robust standard errors clustered at the cantonal and household levels in parentheses. The dependent variable is the first principal component of values that are associated with reciprocity, such as to what extent it is justifiable to lie in own interest, cheat on taxes, and claim state benefits not entitled to. Data are from wave 13 of the Swiss Household Panel. All columns include as individual controls age, education, male, log household income, catholic, protestant, left wing, center; and as municipal / cantonal controls altitude, Gini coefficient for income inequality, and GDP per capita. *** indicates significance at the 1% level.

! 16

IV. HISTORICAL DEMOCRACY AND RECIPROCITY Tables A14 shows the coefficients on covariates for the benchmark specifications in columns 1-3

of Table 4 of the main paper.

A. Benchmark estimates with coefficients on covariates

TABLE A14a: HISTORICAL DEMOCRACY AND RECIPROCITY: EXPERIENCE

Dependent variable: Reciprocity No

controls (1)

Individual controls

(2)

Municipal / cantonal controls

(3) Experience 0.410*** 0.405*** 0.424*** (0.045) (0.055) (0.056) Age -0.000 0.001 (0.002) (0.002) University degree 0.043 0.052 (0.068) (0.061) Male -0.005 0.002 (0.071) (0.074) Log household income 0.070 0.047 (0.096) (0.094) Catholic -0.049 -0.012 (0.077) (0.080) Protestant -0.094 -0.098 (0.096) (0.099) Left wing 0.154 0.168 (0.134) (0.146) Center 0.104 0.107 (0.092) (0.091) Gini income -1.528** (0.647) Altitude -0.013 (0.009) GDP per capita 0.001 (0.001) Constant 0.424*** -0.433 0.263 (0.035) (1.044) (1.088) Observations 262 262 262 R-squared 0.141 0.165 0.192 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. ***, ** indicate significance at the 1% and 5% levels, respectively.

! 17

TABLE A14b: HISTORICAL DEMOCRACY AND RECIPROCITY: DURATION

Dependent variable: Reciprocity No

controls (1)

Individual controls

(2)

Municipal / cantonal controls

(3) Duration 0.085*** 0.084*** 0.089*** (0.008) (0.011) (0.011) Age 0.000 0.001 (0.002) (0.002) University degree 0.041 0.051 (0.066) (0.060) Male -0.011 -0.003 (0.071) (0.073) Log household income 0.076 0.053 (0.097) (0.095) Catholic -0.043 -0.007 (0.076) (0.077) Protestant -0.097 -0.104 (0.095) (0.097) Left wing 0.134 0.147 (0.134) (0.147) Center 0.108 0.108 (0.090) (0.088) Gini income -1.697** (0.646) Altitude -0.011 (0.008) GDP per capita 0.001 (0.001) Constant 0.428*** -0.505 0.214 (0.035) (1.057) (1.101) Observations 262 262 262 R-squared 0.144 0.168 0.199 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. ***, ** indicate significance at the 1% and 5% levels, respectively.

B. Dropping one canton at a time

Table A15 reports coefficients on experience (column 1) and duration (column 2) obtained after

dropping one canton at a time.

! 18

TABLE A15: HISTORICAL DEMOCRACY AND RECIPROCITY: DROPPING ONE CANTON AT A TIME

Dependent variable: Reciprocity Canton dropped Experience Duration (1) (2) Zurich 0.421*** 0.078*** (0.063) (0.012) Bern 0.382*** 0.082*** (0.051) (0.010) Lucerne 0.425*** 0.089*** (0.062) (0.011) Uri 0.419*** 0.088*** (0.056) (0.011) Schwyz 0.408*** 0.086*** (0.057) (0.010) Obwalden 0.426*** 0.089*** (0.056) (0.011) Glarus 0.427*** 0.089*** (0.056) (0.011) Zug 0.428*** 0.090*** (0.057) (0.010) Fribourg 0.405*** 0.085*** (0.053) (0.010) Solothurn 0.429*** 0.089*** (0.056) (0.011) Basel city 0.414*** 0.087*** (0.058) (0.011) Basel land 0.427*** 0.089*** (0.058) (0.011) Schaffhausen 0.420*** 0.088*** (0.057) (0.011) Appenzell IR 0.429*** 0.089*** (0.056) (0.010) St. Gallen 0.447*** 0.091*** (0.057) (0.012) Grisons 0.428*** 0.088*** (0.056) (0.011) Aargau 0.422*** 0.089*** (0.057) (0.011) Thurgau 0.441*** 0.092*** (0.054) (0.010) Vaud 0.415*** 0.087*** (0.063) (0.012) Valais 0.429*** 0.090*** (0.061) (0.012) Neuchatel 0.447*** 0.093*** (0.052) (0.010) Geneva 0.427*** 0.089*** (0.060) (0.011) Jura 0.423*** 0.089*** (0.057) (0.011) Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. All columns control for covariates listed in panel E of Table 1, main paper. *** indicates significance at the 1% level.

! 19

C. Additional historical proxies at the cantonal level

TABLE A16: HISTORICAL DEMOCRACY AND RECIPROCITY: ADDITIONAL HISTORICAL PROXIES AT THE CANTONAL LEVEL

Dependent variable: Reciprocity Population before

1798 (1)

Population 1850 (2)

Population density 1850 (3)

Panel A: Experience Historical democracy 0.435*** 0.423*** 0.423*** (0.057) (0.056) (0.056) Population before 1798 -0.000 (0.000) Population 1850 -0.0002** (0.0001) Population density 1850 -0.000 (0.000) R-squared 0.199 0.194 0.192 Panel A: Duration Historical democracy 0.091*** 0.089*** 0.089*** (0.010) (0.010) (0.011) Population before 1798 -0.000 (0.000) Population 1850 -0.0002*** (0.0001) Population density 1850 -0.000 (0.000) R-squared 0.206 0.202 0.199 Other covariates Yes Yes Yes Observations 262 262 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Columns 1-3 include additional controls: Column 1 includes population before 1798; column 2 includes population in 1850, and column 3 includes population density in 1850. ***, ** indicate significance at the 1% and 5% levels, respectively.

! 20

D. Comparison within the historical and modern canton of Bern

Table A17 shows that our results hold when we consider the sub-sample of municipalities under

the rule of the city-state of Bern, the modern canton of Bern, and after excluding the city of Bern.

TABLE A17: HISTORICAL DEMOCRACY AND RECIPROCITY:

SUB-SAMPLE ANALYSIS (BERN)

Dependent variable: Reciprocity Panel A: Experience Bern

city-state Bern

canton Drop

Bern city (1) (2) (3) Historical democracy 0.584*** 0.503** 0.382*** (0.145) (0.206) (0.051) R-squared 0.300 0.353 0.200 Panel B: Duration Historical democracy 0.121*** 0.110** 0.082*** (0.030) (0.046) (0.010) R-squared 0.299 0.350 0.212 Other covariates Yes Yes Yes Observations 77 42 220 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. Column 1 considers a sub-sample of municipalities that were under the rule of the city-state of Bern from 1536 to 1798. Column 2 considers only the modern canton of Bern. Column 3 excludes the city of Bern. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. ***, ** indicate significance at the 1% and 5% levels, respectively.

E. Additional controls at the municipal level

Tables A18 presents additional robustness checks that we conducted on the association between

historical democracy and reciprocity by introducing additional controls at the municipal level.

Note that our results remain unchanged if we replace population density in 1850 with population

in 1850.

! 21

TABLE A18: HISTORICAL DEMOCRACY AND RECIPROCITY: ADDITIONAL MUNICIPAL LEVEL CONTROLS

Dependent variable: Reciprocity Share of

foreigners Competition

index Unemployment

rate Population

density 1850 Cantonal capital

distance (1) (2) (3) (4) (5) Panel A: Experience Historical democracy 0.418*** 0.400*** 0.419*** 0.426*** 0.431*** (0.056) (0.053) (0.054) (0.056) (0.056) Share of foreigners -0.003 (0.002) Competition index 0.029 (0.021) Unemployment rate -0.006 (0.015) Population density 1850 -0.000 (0.000) Cantonal capital distance 0.001 (0.002) R-squared 0.195 0.195 0.193 0.194 0.193 Panel B: Duration Historical democracy 0.088*** 0.087*** 0.087*** 0.089*** 0.093*** (0.010) (0.009) (0.010) (0.011) (0.010) Share of foreigners -0.004** (0.002) Competition index 0.008 (0.025) Unemployment rate -0.012 (0.014) Population density1850 -0.000 (0.000) Cantonal capital distance 0.002 (0.002) R-squared 0.202 0.199 0.200 0.200 0.203 Other covariates Yes Yes Yes Yes Yes Observations 262 262 262 259 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing and center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Columns 1-5 include additional controls at the municipal level. Column 1 includes the share of foreigners; column 2 includes an index of competition that is proxied by the attractiveness of the Swiss cantons to business assessed by Credit Suisse (see Holdener et al. 2013); column 3 includes unemployment rate today; column 4 includes population density in 1850; and column 5 includes the distance of a municipality from the local capital canton that was the center of power in the Middle Ages. The number of observations is lower in column 4 because of missing information on population density in 1850 for three municipalities. ***, ** indicate significance at the 1% and 5% levels, respectively.

! 22

F. Additional controls at the individual level

Table A19 presents additional robustness checks that we conducted on the relationship between

historical democracy and reciprocity by introducing additional controls at the individual level.

TABLE A19: HISTORICAL DEMOCRACY AND RECIPROCITY:

ADDITIONAL INDIVIDUAL LEVEL CONTROLS

Dependent variable: Reciprocity Panel A: Experience Naturalized

Swiss citizen

Migrant Big Five personality

traits

Game comprehension

(1) (2) (3) (4) Historical democracy 0.406*** 0.424*** 0.427*** 0.425*** (0.058) (0.055) (0.053) (0.056) Naturalized Swiss citizen 0.037 (0.065) Migrant 0.006 (0.055) Game comprehension -0.033 (0.075) R-squared 0.178 0.192 0.183 0.193 Panel B: Duration Historical democracy 0.084*** 0.089*** 0.090*** 0.089*** (0.011) (0.010) (0.011) (0.011) Naturalized Swiss citizen 0.017 (0.062) Migrant 0.002 (0.055) Game comprehension -0.015 (0.069) R-squared 0.182 0.199 0.189 0.199 Other covariates Yes Yes Yes Yes Observations 252 262 237 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Column 1 includes a dummy variable equal to one if individuals are naturalized Swiss citizens, 0 otherwise; column 2 includes a dummy variable if individuals have migrated, 0 otherwise; column 3 includes the Big Five personality traits at the individual level described in Appendix A.VI; and column 4 includes a game comprehension variable measured as the number of correct responses to the control questions described in Appendix B. The number of observations is lower in columns 1 and 3 because of missing answers to the questions on naturalized citizen and Big Five personality traits. *** indicates significance at the 1% level.

! 23

G. Epidemiological approach

Table A20 presents results from an epidemiological approach using measures of historical

democracy from the birth municipality for the sub-sample of migrants and accounting for

resident canton fixed effects. Our results hold even when we use two-way clustering at the level

of the birth and resident cantons (p-values < 0.008).

TABLE A20: HISTORICAL DEMOCRACY AND RECIPROCITY: EPIDEMIOLOGICAL APPROACH

Dependent variable: Reciprocity Experience

(1) Duration

(2) Historical democracy 0.560*** 0.119*** (0.186) (0.034) [0.211] [0.042] Other covariates Yes Yes Canton fixed effects Yes Yes Observations 87 87 R-squared 0.274 0.289 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses using the sub-sample of migrants. In square brackets, we report two-way cluster-robust standard errors at the level of the birth and resident cantons. The dependent variable is the propensity to reciprocate in a public goods game. Historical democracy is from the municipality of birth. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. *** indicates significance at the 1% level.

! 24

H. Sub-sample analysis

Table A21 presents estimates comparing individuals living in urban areas versus rural areas, and

males versus females.

TABLE A21: HISTORICAL DEMOCRACY AND RECIPROCITY:

SUB-SAMPLE ANALYSIS

Dependent variable: Reciprocity Panel A: Experience Urban Rural Male Female (1) (2) (3) (4) Historical democracy 0.532*** 0.444*** 0.435*** 0.435*** (0.087) (0.105) (0.117) (0.092) R-squared 0.318 0.201 0.237 0.222 Panel B: Duration Historical democracy 0.100*** 0.102*** 0.095*** 0.087*** (0.017) (0.022) (0.018) (0.020) R-squared 0.323 0.200 0.260 0.215 Other covariates Yes Yes Yes Yes Observations 122 140 141 121 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. Column 1 considers the sub-sample of individuals living in a city while column 2 those living in a rural area. Columns 3 and 4 consider the sub-sample of men and women, respectively. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. *** indicates significance at the 1% level.

! 25

Table A22 presents estimates from our sub-sample of Roestigraben cantons, followed by

dropping these cantons, and then dropping individuals who are altruists and flat contributors. The

latter two types are dropped because they have the same Spearman coefficient as free riders. .

TABLE A22: HISTORICAL DEMOCRACY AND RECIPROCITY:

ROESTIGRABEN SAMPLE AND ALTRUISTS / FLAT CONTRIBUTORS

Dependent variable: Reciprocity Roestigraben

sample (1)

Drop Roestigraben cantons

(2)

Drop altruists and flat contributors

(3) Panel A: Experience Historical democracy 0.610*** 0.365*** 0.394*** (0.141) (0.055) (0.061) R-squared 0.409 0.212 0.190 Panel B: Duration Historical democracy 0.132*** 0.078*** 0.082*** (0.030) (0.012) (0.013) R-squared 0.416 0.224 0.193 Other covariates Yes Yes Yes Observations 62 200 239 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. The number of observations changes because column 1 includes only three cantons from the Roestigraben (Bern, Fribourg, and Valais), column 2 drops these three cantons, and column 3 drops altruists and flat contributors. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. Column 1 also includes canton fixed effects and therefore excludes GDP per capita. It also excludes left wing orientation because of little variation within a canton. *** indicates significance at the 1% level.

! 26

I. Alternative dependent variable

Table A23 uses as alternative dependent variable a dummy variable equal to one if an individual

is a reciprocator, 0 otherwise.

TABLE A23: HISTORICAL DEMOCRACY AND RECIPROCITY:

ALTERNATIVE DEPENDENT VARIABLE

Dependent variable: Reciprocator Experience

(1) Duration

(2) Historical democracy 0.357*** 0.077*** (0.046) (0.009) Other covariates Yes Yes Observations 262 262 R-squared 0.168 0.181 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is a dummy variable equal to one if an individual is a reciprocator, 0 otherwise. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing, center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. *** indicates significance at the 1% level.

! 27

J. Alternative data source: Swiss Household Panel

Table A24 presents our main results using wave 13 of the Swiss Household Panel (SHP) as an

alternative data source. The dependent variable is a principal component of values associated

with reciprocity, such as to what extent it is justifiable to lie in own interest, cheat on taxes, and

claim state benefits not entitled to.

TABLE A24: HISTORICAL DEMOCRACY AND VALUES ASSOCIATED WITH RECIPROCITY:

SWISS HOUSEHOLD PANEL

Dependent variable: Principal component of values Panel A: Experience No controls Individual level

controls Municipal / cantonal

level controls (1) (2) (3) Historical democracy 0.278*** 0.280*** 0.325*** (0.095) (0.094) (0.088) R-squared 0.011 0.069 0.073 Panel B: Duration Historical democracy 0.050*** 0.052*** 0.062*** (0.019) (0.018) (0.016) R-squared 0.010 0.068 0.073 Other covariates Yes Yes Yes Observations 1,901 1,859 1,859 Notes. OLS coefficients with robust standard errors clustered at the cantonal and household level in parentheses. The dependent variable is the first principal component of values that are associated with reciprocity, such as to what extent it is justifiable to lie in own interest, cheat on taxes, and claim state benefits not entitled to. Data are from wave 13 of the Swiss Household Panel. All columns include as “other covariates” age, education, male, log household income, catholic, protestant, left wing and center, altitude and Gini coefficient for income inequality at the municipal level, and GDP per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. *** indicates significance at the 1% level.

! 28

V. HISTORICAL DEMOCRACY AND RECIPROCITY: DISCUSSION

A. Pre-existing differences across areas with and without Zaehringen rule

Table A25 compares municipalities with Zaehringen rule in the Middle Ages with municipalities

under the rule of concurrent dynasties across a number of characteristics. Each column reports

results from a regression of the covariate listed in the column heading on dummy variables for

Kyburg and Habsburg with respect to Zaehringen as a benchmark category. The results clearly

show that there are no differences in any of these characteristics across different dynasties that

ruled concurrently with the Zaehringen on the Swiss plateau. These results mitigate selection

concerns arising from pre-existing differences.

TABLE A25: PRE-EXISTING DIFFERENCES ACROSS AREAS WITH AND WITHOUT ZAEHRINGEN RULE

Climate suitability (1)

Soil suitability (2)

Altitude (3)

Waste land (4)

Kyburg 0.803 (1.148)

-0.178 (3.129)

0.207 (0.607)

0.360 (1.371)

Habsburg 0.795 (0.983)

-2.218 (3.062)

-0.389 (0.503)

-1.358 (0.827)

Constant 4.282*** (0.761)

11.026*** (2.657)

5.677*** (0.460)

2.808*** (0.829)

R-squared 0.012 0.020 0.012 0.013 Other covariates No No No No Observations 163 163 163 163 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The sample refers to the individuals from municipalities that were under Kyburg, Habsburg, or Zaehringen rule in the Middle Ages. The dependent variables are as follows: in column 1 it is climate suitability index by the Swiss Federal Office for Agriculture. It represents climatic conditions and restrictions for agriculture, highlighting differences in cultivation options. In column 2 it is soil suitability index prepared by the Swiss Federal Office for Agriculture. It is a categorical variable where each category represents a different element of the landscape characterized by bedrock, slope and gradient. In column 3 it is the average elevation of a municipality in meters / 100. In column 4 it is the percentage of waste land in a municipality (synonymous with rocky and mountainous land with steep slopes not fit for human use). Kyburg, Habsburg, and Zaehringen are dummy variables equal to one if an individual is from a municipality that was under the Kyburg, Habsburg, and Zaehringen rule, respectively. The benchmark category included in the constant is Zaehringen. Similar results are obtained when we control for covariates in all four columns or use ordered-probit estimation for columns 1 and 2. *** indicates significance at the 1% level.

! 29

B. Intention to treat estimates (ITT)

Table A26 reports ITT estimates of the association between the Zaehringen dummy and

reciprocity. Column 1 shows that the Zaehringen dummy has a large positive and significant

coefficient. This result implies that individuals from municipalities that were under the

Zaehringen rule display higher reciprocity by 0.12 points.

TABLE A26: INTENTION TO TREAT ESTIMATES AND TESTS FOR THE EXCLUSION RESTRICTION

Dependent variable: Reciprocity (1) (2) (3) Zaehringen 0.121**

(0.056) 0.008

(0.057) -0.022 (0.037)

Historical democracy experience 0.422*** (0.057)

Historical democracy duration 0.090*** (0.010)

Individual controls Yes Yes Yes Municipal controls Yes Yes Yes Observations 262 262 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. The dependent variable is the propensity to reciprocate in a public goods game. Zaehringen is a dummy variable equal to one if an individual is from a municipality that was under the Zaehringen rule in the Middle Ages. Individual level controls include age, education, male, household income, catholic, protestant, center and left. Municipal controls include altitude, Gini (income), and cantonal level GPD per capita. These variables are described in panel E of Table 1 of the main paper. ***, ** indicate significance at the 1% and 5% levels, respectively.

C. Instrumental variables estimates

We discuss two results in support of the exclusion restriction. First, the coefficient on Zaehringen

dummy drops to nearly zero and becomes statistically insignificant when we additionally control

for historical democracy via experience in column 2 and duration in column 3 of Table A26. In

contrast, the coefficients on experience and duration remain large and highly significant. Second,

Figure A2 shows average reciprocity across individuals from municipalities associated with

different dynasties when historical experience is lacking. As is evident from the figure, there is

no difference in reciprocity.

! 30

FIGURE A2. AVERAGE PROPENSITY FOR RECIPROCITY BY DYNASTIES

WHEN HISTORICAL DEMOCRACY IS LACKING Notes.! Y$axis! plots! reciprocity,! measured! as! the! Spearman! correlation! between! self! and! other! players’!contribution!in!the!conditional!decision!of!the!public!goods!game.!!

First-stage estimates Panel A of Table A27 reports estimates from the first-stage using experience in columns 1-2 and

duration in columns 3-4. Panel A shows that individuals from municipalities associated with

Zaehringen rule in the past are nearly 30 percentage points more likely to be from municipalities

that have experienced historical democracy and also for a duration that is longer by nearly 160

years. These differences are highly significant and hold regardless of whether we control for

other covariates or not.

Second-stage estimates

Panel B of Table A27 reports estimates from the second-stage using experience in columns 1-2

and duration in columns 3-4. Without or with controls the IV estimates of the effect of historical

democracy on reciprocity are positive and statistically significant (p-value < 0.048). In terms of

0.2

.4.6

Reciprocity

Zaehringen Kyburg Habsburg

! 31

magnitude they are very much similar to their OLS counterparts (0.42 for experience and 0.089

for duration).

TABLE A27: INSTRUMENTAL VARIABLE ESTIMATES

Experience Duration (1) (2) (3) (4) Panel A: First-stage estimates Dependent variable: Historical experience of democracy Zaehringen 0.305***

(0.061) 0.269*** (0.061)

1.759*** (0.309)

1.588*** (0.301)

F-statistics 24.95 19.48 32.50 27.92 Panel B: Second-stage estimates Dependent variable: Reciprocity Historical democracy 0.557***

(0.203) 0.450** (0.226)

0.097*** (0.035)

0.076** (0.039)

Individual controls No Yes No Yes Municipal / cantonal controls No Yes No Yes Observations 262 262 262 262 Notes. OLS coefficients with robust standard errors clustered at the cantonal level in parentheses. Individual level controls include age, education, male, household income, catholic, protestant, center and left wing. Municipal and cantonal controls include altitude and Gini (income) at the municipal level, and GPD per capita at the cantonal level. These variables are described in panel E of Table 1 of the main paper. In panel A, the dependent variable is equal to one if an individual is from a municipality with historical democracy, 0 otherwise. In panel B, the dependent variable is the propensity to reciprocate in a public goods game. Zaehringen is a dummy variable equal to one if an individual is from a municipality that was under the Zaehringen rule in the Middle Ages. ***, ** indicate significance at the 1% and 5% levels, respectively.

! 32

VI. BIG FIVE PERSONALITY TRAITS In our post-experimental survey, we follow a common approach in the literature to elicit the Big

Five personality traits (e.g., Winkelmann and Winkelmann 2008; Boyce et al. 2010; Heineck and

Anger 2010; Boyce and Wood 2011). Individuals face a question that includes 15 different items

related to their personality as follows: “Please, say how well do the following statements

describe your personality (where 1 means “agree,” 2 “neither agree nor disagree,” and 3

“agree”).”

I see myself as someone who…

1: does a thorough job

2: is communicative, talkative

3: is sometimes somewhat rude to others

4: is original, comes up with new ideas

5: worries a lot

6: has a forgiving nature

7: tends to be lazy

8: is outgoing, sociable

9: values artistic experiences

10: gets nervous easily

11: does things effectively and efficiently

12: is reserved

13: is considerate and kind to others

14: has an active imagination

15: is relaxed, handles stress well

Items 4, 9, and 14 are used to measure openness to experience; items 1, 7 (reverse coded), and 11

to measure conscientiousness; items 2, 8, and 12 (reverse coded) to measure extraversion; items

3 (reverse coded), 6, and 13 to measure agreeableness; and items 5, 10, and 15 (reverse coded) to

measure neuroticism. In the analysis, we standardize the score with a mean of zero and standard

deviation of one. Table A28 shows the descriptive statistics of the Big Five personality traits by

social group. On average Swiss Germans are significantly more open to experience than Swiss

! 33

French, while Swiss French are more neurotics than Swiss Germans. However, they do not differ

significantly in levels of conscientiousness, extroversion, and agreeableness.

TABLE A28: SUMMARY STATISTICS OF BIG FIVE PERSONALITY TRAITS

(1) (2) (3) Swiss Germans Swiss French Difference Variable Observations Mean Std. Dev. Observations Mean Std. Dev. p-value Openness to experience 187 0.020 0.970 60 -0.361 1.036 0.010 Conscientiousness 189 0.068 0.983 60 -0.035 1.030 0.485 Extroversion 189 -0.066 0.957 60 0.101 1.085 0.255 Agreeableness 187 0.016 0.914 60 0.153 1.125 0.345 Neuroticism 180 -0.124 0.929 59 0.255 1.189 0.012

! 34

APPENDIX B: EXPERIMENTAL INSTRUCTIONS Introduction You are taking part in a research by ETH Zurich. This is a research about decision-making by individuals. The contents will be kept highly confidential and will be only used for scientific purposes. Whatever decisions you take will be ANONYMOUS. You will take part in THREE studies. Depending on your and other players’ decisions in these studies, you can earn up to 175 Swiss Francs. Therefore, please read the instructions carefully. In the end, we will use a lottery to select 40 participants and pay them the exact amount earned by them in one of the three studies. We will get in touch with the selected participants to transfer the money. Please take all the decisions without consulting anyone else. Please, do not use the back and forward button of the browser. Basic Instructions We will now introduce you to the basic situation in which you have to take a decision. You will confront this situation in all the three studies. You are a member of a group comprising two players A and B. YOU ARE ALWAYS PLAYER A Player B is not a computer, but a real person. You don’t know who player B is. Similarly, player B does not know who you are. You are also not known to us. Each player gets 100 Francs at the start of the study. You have to decide what to do with this money. You can either keep the Francs in your “private account” or you can invest them in a “common fund”. Francs not invested in the common fund are automatically transferred to your private account. Earnings from the private account: For each Franc you keep in the private account, you get exactly 1 Franc. For example, if you put 50 Francs in your private account, you will earn exactly 50 Francs. Except for you, no one else has access to earnings from your private account.

! 35

Earnings from the common fund: For each Franc that you invest in the common fund you get 0.75 Francs and player B also gets 0.75 Francs. Of course, you also get 0.75 Francs for each token invested by player B. Earnings from the common fund = total number of Francs invested in the common fund by you and player B multiplied by 0.75. Example, if the sum of Francs invested by you and player B in the common fund is 200, you and player B earn 200 x 0.75 = 150 Francs each from the common fund. Total earnings = earnings from the private account + earnings from the common fund

! 36

Control questions Now we will ask you to answer two questions to help you understand the instructions better. Please answer the following questions carefully. Question 1: Out of 100 Francs, player A and B invest 10 Francs each in the common fund. How much does each player earn from the common fund? What are the total earnings of player A? What are the total earnings of player B?

Question 2: Out of 100 Francs, Player A invests zero Francs in the common fund, but player B invests 40 Francs. How much does each player earn from the common fund? What are the total earnings of player A? What are the total earnings of player B?

STUDY 1 Study 1 contains the decision situation we have just described to you. You will get 100 Francs. You can put them into your private account or you can invest them into a common fund. You will have to take two types of decisions. We will call them Decision I and Decision II.

Decision I: You will have to decide how many out of 100 Francs to invest into the common fund. You can ONLY invest in multiples of 10. Example: 0, 10, 20, 30 and so on till 100. You will have to enter the amount in a box like this:

After this, you will have to guess how many Francs player B whose identity you DO NOT know would invest into the common fund? You will have to enter the amount in a box like this:

! 37

Decision II: You will have to indicate the amount of Francs you would like to invest into the common fund for each possible investment by player B. This will become clear to you, if you look at the table on the screen below (please, do not fill in the table as yet):

Player B (Anonymous)

Player A (You)

Player B (Anonymous)

Player A (You)

0

60

10

70

20

80

30

90

40

100

50

You will have to enter your decision into the box next to the contribution of player B. For example: How many Francs would you like to invest into the common fund if player B invests zero Francs in the common fund? How many Francs would you like to invest into the common fund if player B invests 10 Francs…and so on till 100 Francs. You will have to make an entry into each box. Make sure that no box is empty. After all participants have taken their decisions I and II, we will use a lottery to select one of the two decisions to determine your payoffs in study 1. You are now taking part in study 1. It will be conducted only once. Decision I: Out of 100 Francs, how many would you like to invest into the common fund? Please enter the amount into the box below:

! 38

How many Francs do you think player B whose identity you DO NOT know would invest into the common fund? Please enter the amount into the box below: Decision II: How many Francs would you like to invest into the common fund for each possible investment by player B? Please choose between the amounts 0, 10, 20, 30, 40, 50 and so on till 100. Make sure that you fill each empty box.

Player B (Anonymous)

Player A (You)

Player B (Anonymous)

Player A (You)

0

60

10

70

20

80

30

90

40

100

50

! 39

REFERENCES Aron, A., E. N. Aron, M. Tudor, and G. Nelson. 1991. “Close Relationships as Including the

Other in the Self.” Journal of Personality and Social Psychology, 60, 241-253.

Boyce, C. J., G. D. A. Brown, and S. C. Moore. 2010. “Money and Happiness: Rank of

Income, Not Income, Affects Life Satisfaction.” Psychological Science, 21, 471–475.

Boyce, C. J., and A. M. Wood. 2011. “Personality and the Marginal Utility of Income:

Personality Interacts with Increases in Household Income to Determine Life Satisfaction.”

Journal of Economic Behavior and Organization, 78, 183-191.

Cameron, C., J. B. Gelbach, and D. L. Miller. 2008. “Bootstrap-based Improvements for

Inference with Clustered Errors.” Review of Economics and Statistics, 90(3), 414-427.

Heineck, G., and S. Anger. 2010. “The Returns to Cognitive Abilities and Personality Traits in

Germany.” Labour Economics, 17, 535-546.

Holdener, V., F. Hürzeler, T. Rühl, A. Schnell, and N. Sydow. 2013. “Locational Quality of

the Swiss Cantons and Regions.” Credit Suisse Global Research. Special Issues Regions,

September.

Winkelmann, L., and R. Winkelmann. 2008. “Personality, Work, and Satisfaction: Evidence

from the German Socio-Economic Panel.” Journal of Positive Psychology, 3, 266–275.