The Relevance of Social Norms for Economic Efficiency: Theory and its Empirical Test
AbstractThis paper proposes a new formulation of the theory of social norms. The theoretical model explores the interrelation between individuals' income, time-use and consumption decisions on the one hand, and the determinants of their decision to conform or not to social norms on the other. It is shown that rational consumers will obey inefficient social norms, which in turn will slow economic development. An empirical test of the model is performed for different categories of countries using a voluminous cross-country micro dataset. The results yield the gain and the cost of disobeying inefficient social norms, the latter of which can be used as a freedom indicator regarding social pressure.
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Date of creation: Apr 2013
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Consumer theory; social norms; social interactions; household production model; economic efficiency;
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- Akerlof, George A, 1980.
"A Theory of Social Custom, of Which Unemployment May be One Consequence,"
The Quarterly Journal of Economics,
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- George A. Akerlof, 1978. "A theory of social custom, of which unemployment may be one consequence," Special Studies Papers 118, Board of Governors of the Federal Reserve System (U.S.).
- Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
- George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
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