Status and Economic Rent: Experimental Evidence on the Matthew Effect


Recommended citation: Clingingsmith and Sheremeta (2017). "Status and Economic Rent: Experimental Evidence on the Matthew Effect" R&R Management Science

Some researchers argue that social status extracts economic rents. Making a causal inference about this claim is difficult with naturally occurring data. For this reason, we conduct an experiment in which participants are divided into investors and workers. Workers are assigned status and then perform a real-effort task. Investors make investments after observing workers’ status and past task performance. We find that workers of higher status receive higher investments when status is derived from performance but not when it is randomly assigned. Surprisingly, the status effect persists even when, conditioning on past performance, status is not predictive of future performance.

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