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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 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

Suggested Citation

  • Anil Alpman, 2013. "The Relevance of Social Norms for Economic Efficiency: Theory and its Empirical Test," Documents de travail du Centre d'Economie de la Sorbonne 13038, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:13038
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    References listed on IDEAS

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    1. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    2. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, Oxford University Press, vol. 94(4), pages 749-775.
    3. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
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    More about this item

    Keywords

    Consumer theory; social norms; social interactions; household production model; economic efficiency;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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