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Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment

Author

Listed:
  • Alessandra Cassar

    (University of San Francisco)

  • Giovanna d'Adda

    (University opf Birmingham)

  • Pauline Grosjean

    () (School of Economics, the University of New South Wales)

Abstract

We design an experiment to examine the causal effect of legal institutional quality on informal norms of cooperation, and study the interaction of institutions and culture in sustaining economic exchange. 346 subjects in Italy and Kosovo play a market game under different and randomly allocated institutional treatments, which generate different incentives to behave honestly, preceded and followed by a non-contractible and non-enforceable trust game. Significant increases in individual trust and trustworthiness follow exposure to ‘better’ institutions. A reduction by one percentage point in the probability of facing a dishonest partner in the market game, which is induced by the quality of legal institutions, increases trust by 7 to 11%, and trustworthiness by 13 to 19%. This suggests that moral norms of cooperative behavior can follow improvements in formal institutional quality. Cultural origin, initial trust and trustworthiness influence opportunistic behavior in markets, but only in the absence of strong formal institutions.

Suggested Citation

  • Alessandra Cassar & Giovanna d'Adda & Pauline Grosjean, 2013. "Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment," Discussion Papers 2013-10, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2013-10
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2013-10.pdf
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Path dependence and cumulative causation in institutions and the people inhabiting them
      by Nicholas Gruen in Club Troppo on 2013-06-18 19:15:22

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    Cited by:

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    2. Fabio Galeotti & Valeria Maggian & Marie Claire Villeval, 2019. "Fraud Deterrence Institutions Reduce Intrinsic Honesty," Working Papers 2019: 28, Department of Economics, University of Venice "Ca' Foscari".
    3. Emeric Henry & Nicolas Jacquemet & Roberto Galbiati, 2017. "Spillovers, Persistence and Learning: Institutions and the Dynamics of Cooperation," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01613850, HAL.
    4. Buggle, Johannes C., 2016. "Law and social capital: Evidence from the Code Napoleon in Germany," European Economic Review, Elsevier, vol. 87(C), pages 148-175.
    5. Aidin Hajikhameneh & Erik O. Kimbrough, 2019. "Individualism, collectivism, and trade," Experimental Economics, Springer;Economic Science Association, vol. 22(2), pages 294-324, June.
    6. Cagala, Tobias & Glogowsky, Ulrich & Grimm, Veronika & Rincke, Johannes & Tuset-Cueva, Amanda, 2019. "Rent extraction and prosocial behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 166(C), pages 709-723.
    7. Fabio Galeotti & Valeria Maggian & Marie Claire Villeval, 2020. "Fraud Deterrence Institutions Reduce Intrinsic Honesty," Working Papers halshs-03084893, HAL.
    8. Ekaterina Borisova & Andrei Govorun & Denis Ivanov, 2016. "Bridging or Bonding? Preferences for Redistribution and Social Capital in Russia," Working Papers 05/2016, IMT Institute for Advanced Studies Lucca, revised Nov 2016.
    9. Bukowski, Paweł, 2019. "How history matters for student performance. lessons from the Partitions of Poland," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 136-175.
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    More about this item

    Keywords

    legal institutions; culture; trust; trustworthiness; markets; experimental methods;
    All these keywords.

    JEL classification:

    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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