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Social Distance and Self-Enforcing Exchange

Listed author(s):
  • Peter T. Leeson

This paper models social distance as endogenous to the choices of individuals. I show how large numbers of socially heterogeneous agents can use signals that reduce social distance to capture the gains from widespread trade. Although traditional reputational mechanisms of multilateral punishment break down where large populations of socially diverse agents are involved, ex ante signaling can make widespread trade self-enforcing. Intergroup trade in precolonial Africa provides evidence for this mechanism. (c) 2008 by The University of Chicago. All rights reserved.

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File URL: http://dx.doi.org/10.1086/588262
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Article provided by University of Chicago Press in its journal The Journal of Legal Studies.

Volume (Year): 37 (2008)
Issue (Month): 1 (01)
Pages: 161-188

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Handle: RePEc:ucp:jlstud:v:37:y:2008:i:1:p:161-188
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLS/

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  2. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 857-882, December.
  3. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
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  10. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, April.
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  12. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
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  15. Michihiro Kandori, 1992. "Social Norms and Community Enforcement," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 63-80.
  16. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
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  18. Bowles, Samuel & Gintis, Herbert, 2004. "Persistent parochialism: trust and exclusion in ethnic networks," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 1-23, September.
  19. Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(1), pages 202-231, April.
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