Financial Security, Climate Shocks and Social Cohesion

Abstract

This paper documents the malleability of prosocial behavior and trust in response to economic shocks. We focus on a low-income setting where prosociality is central to the integration of refugees into ultra-poor host communities. We generate an exogenous positive shock to financial security through a randomized cash transfer and employment support program that increased financial security by 1.93 sd and social cohesion by 0.53 sd relative to the control group, implying an elasticity of approximately 0.25 sd. We then leverage a climate shock that negatively affected financial security for some participants. Consistent with a causal relationship, treated participants who experienced even a modest decline in financial security due to the shock reported a disproportionately large reduction in prosociality, implying an elasticity of 0.49 sd. Taken together, these findings reveal that individuals shift between cooperative and competitive mindsets in response to changes in the salience of their perceived financial security rather than shifts in preferences, incentives, or norms. Providing income and employment support to both refugees and low-income host community members led to more cooperative attitudes and behaviors, while