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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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    References listed on IDEAS

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    Blog mentions

    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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    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.
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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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