Studies show that coethnicity is an important determinant of political interactions such as cooperation and vote choice, findings that are based on a logic of repeat interaction. We know less about differential treatment in casual interactions where repeat contact is not guaranteed. We test whether coethnic bias looks similar in casual interactions by conducting an audit experiment imitating real casual interactions in the housing and rice markets in Lagos, Nigeria. We find that coethnics give each other better deals, consistent with findings of pro-coethnic bias in political interactions. In casual interactions, however, class identity can confound this effect. We show this discrimination is driven by taste-based motives, a mechanism not typically found to be present in political interactions. These results have important implications for understanding the relationship between diversity, trust, and conflict, as cross-group casual interactions are necessary for cross- group associational forms of engagement, which promote inter-group understanding and peace.
Nathaniel Leff, Jeffry Frieden, and Shelby Grossman. “Trust and Envy: The Political Economy of Business Groups in Developing Countries.” pdf
Diversified business groups play a major role in the economies of many developing countries. Business group members, often from the same communal, ethnic, or tribal group, have or develop inter-personal relations that make it easier to obtain information and monitor compliance related to transactions that require a strong measure of trust. This in-group cohesion facilitates profitable and productive economic activity. However, it can create resentment among other members of society who are barred from membership in a group that is, of necessity, exclusive. This envy can fuel a self-reinforcing cycle of societal hostility and group protectiveness that can deprive society of the economic benefits the groups can provide. There are several possible reactions such as ‘affirmative action’ programs that can slow or stop the cycle of envy and group vulnerability.