The dark side of leadership: An experiment on religious heterogeneity and cooperation in India

•We examine effects of religious heterogeneity on cooperation behavior in a one-shot Public Goods Game (PGG) in India.•We examine the effectiveness of ‘Leading by example’ on cooperativeness in religiously pure and mixed groups.•Religious heterogeneity does not reduce cooperation in the baseline PGG.•Leadership does not increase cooperation in the two-step PGG.•In heterogeneous groups leadership significantly lowers cooperation.

We investigate voluntary contribution to public goods in culturally heterogeneous groups with a laboratory experiment conducted among 432 Hindu and Muslim subjects in India. With our specification of ‘Leading by example’ we test for an interaction effect between leadership and religious heterogeneity in a high stake environment. While cultural diversity does not affect contributions in the standard linear Public Goods Game, it reduces cooperation in the presence of a leader. Furthermore, we show that preferences for conditional cooperation are only prevalent in pure groups. In mixed groups, poor leadership and uncertainty about followers’ reciprocity hinders the functionality of leadership as an institutional device to resolve social dilemmas.