Raising the price of talk: An experimental analysis of transparent leadership

• We conduct public goods experiments with exogenously selected leaders.
• Leaders send non-binding contribution suggestions to their group.
• We vary whether a leader's actions are publicly known (transparent).
• Leaders and members follow recommendations more closely under transparency.
• Transparency promotes cooperation, earnings and earnings equality.

Does transparent leadership promote cooperative groups? We address this issue using a public goods experiment with exogenously selected leaders who are able to send non-binding contribution suggestions to the group. To investigate the effect of transparency in this setting we vary the ease with which a leader's actions are known by the group. We find leaders’ suggestions encourage cooperation in all treatments, but that both leaders and their group members are more likely to follow leaders’ recommendations when institutions are transparent so that non-leaders can easily see what the leader does. Consequently, transparency leads to significantly more cooperation, higher group earnings and reduced variation in contributions among group members.