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The Relevance of Social Norms for Economic Efficiency: Theory and its Empirical Test

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    Abstract

    This paper proposes a new theory of social norms that explores the relation between individuals' income, time allocation decisions, and consumption choices on the one hand, and the determinants of individuals' decision to conform or not to social norms on the other. It is shown that rational consumers may obey inefficient social norms, which in turn would slow economic development. An empirical test of the model is performed for different categories of countries using the World Values Survey, 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 an indicator of social pressure regarding conformity.

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    File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2013/13038R.pdf
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    Bibliographic Info

    Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 13038r.

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    Length: 28 pages
    Date of creation: Apr 2013
    Date of revision: Aug 2013
    Handle: RePEc:mse:cesdoc:13038r

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    Related research

    Keywords: Social norms; social interactions; consumer behavior; household production; economic development; social pressure indicator.;

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    1. Elster, Jon, 1996. "Rationality and the Emotions," Economic Journal, Royal Economic Society, vol. 106(438), pages 1386-97, September.
    2. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
    3. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-46, October.
    4. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
    5. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change
      [Understanding the Process of Economic Change]
      ," Introductory Chapters, Princeton University Press.
    6. Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 749-75, June.
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