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Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay

Author

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  • Laura Schechter

Abstract

In developing countries lacking legal enforcement, villagers may use implicit contracts to minimize crime. I construct a dynamic limited-commitment model, in which a thief cannot commit to forego stealing, but is induced to steal less by the promise of future gifts. Combining survey data on production, theft, gifts, and trust with experiments measuring trustworthiness, I provide supporting evidence. Farmers living near more relatives or with plots that are difficult to steal from give fewer gifts and trust more, and those living near more relatives also experience less theft. Giving increases when trust is lower and the threat of theft is greater. (JEL D86, K42, O17, Z13)

Suggested Citation

  • Laura Schechter, 2007. "Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay," American Economic Review, American Economic Association, vol. 97(5), pages 1560-1582, December.
    • Handle: RePEc:aea:aecrev:v:97:y:2007:i:5:p:1560-1582
    Note: DOI: 10.1257/aer.97.5.1560
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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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