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Can Integrity Replace Institutions? Theory and Evidence

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Author Info
Gilad D. Aharonovitz ()
Nathan Skuza ()
Faysal Fahs ()
Abstract

Institutions are important for proper economic performance, but are replaceable by trust or other social norms. We show that when proper institutions and trust are missing, integrity of the individuals can replace them. We construct a model of a transactions-based economy with contracts preceding the transactions, and show that any one of (1) institutions, (2) trust, or (3) integrity, foster economic growth. We construct data of economic performance of social groups in Lebanon, measure integrity and other values of these groups, and use this data and data from Kenya to support one of the model’s predictions. Policy implications are discussed.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2730.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2730

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Related research
Keywords: economic development; institutions; integrity; Lebanon; social norms; trust;

Find related papers by JEL classification:
A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
E19 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Other
O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
Z10 - Other Special Topics - - Cultural Economics - - - General

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  10. repec:cpr:ceprdp:7379 is not listed on IDEAS
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  18. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains Taxation in the Real World," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  21. Kurt Schmidheiny & Marius Brülhart, 2009. "On the Equivalence of Location Choice Models: Conditional Logit, Nested Logit and Poisson," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  30. Aleksandra Riedl & Silvia Rocha-Akis, 2009. "Testing the Tax Competition Theory: How Elastic are National Tax Bases in OECD Countries?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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