nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2007‒06‒18
nine papers chosen by
Fabio Sabatini
University of Rome, La Sapienza

  1. Optimal public policy and endogenous preferences: an application to an economy with for-profit and non-profit enterprises By Luigi Bonatti
  2. Cultural relativism and ideological policy makers in a dynamic model with endogenous preferences By Luigi Bonatti
  3. Money, Happiness, and Aspirations: An Experimental Study By Michael McBride
  4. Why Churches Need Free-riders: Religious Capital Formation and Religious Group Survival By Michael McBride
  5. Value of Intangible Job Characteristics in Workers' Job and Life Satisfaction: How much are they worth? By Namkee Ahn
  6. Neighbors Matter: Causal Community Effects and Stock Market Participation By Jeffrey R. Brown; Zoran Ivkovich; Paul A. Smith; Scott Weisbenner
  7. Monopoly pricing of social goods By Sääskilahti, Pekka
  8. Democracy, Technology, and Growth By Philippe Aghion; Alberto Alesina; Francesco Trebbi
  9. Reciprocity, Inequity Aversion, and Oligopolistic Competition By Pinto, Luis Santos

  1. By: Luigi Bonatti
    Abstract: We present a general equilibrium model where profit-maximizing firms and non-profit organizations coexist, and the people’s propensity to devote efforts to non-profit activities increases with the stock of social capital. In its turn, the formation of social capital is stimulated by an increase in the aggregate volume of non-profit activities. Therefore, a public policy subsidizing the nonprofits has an indirect effect on people’s preferences concerning the effort to devote to these organizations via its positive impact on the accumulation of social capital. Within this framework, we analyze the optimal policies of a government facing myopic or rational agents.
    Keywords: Myopic behavior, Work effort, Social capital, Altruism, Third sector.
    JEL: D11 D60 H20 J30 L31
    Date: 2007
  2. By: Luigi Bonatti
    Abstract: This paper shows that two societies differing because of the people’s initial propensity to devote time and efforts to non-profit activities may never converge. This lack of convergence is interpreted as the tendency of the cultural values and attitudes dominant in each society to perpetuate because of the economic behavior and the social processes that they contribute to elicit. Furthermore, it may not be possible to rank the different steady states toward which these two societies converge according to the Paretian criterion. Finally, the paper examines policies that promote values and attitudes non coincident with those that are currently dominant.
    Keywords: Economic policy, Multiple steady states, Social capital, Altruism, Non-profit.
    JEL: D11 D60 H20 J30 L31
    Date: 2007
  3. By: Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: The past decade has witnessed an explosion of interest in the scientific study of happiness. Economists, in particular, find that happiness increases in income but decreases in income aspirations, and this work prompts examination of how aspirations form and adapt over time. This paper presents results from the first experimental study of how multiple factors -- past payments, social comparisons, and expectations -- influence aspiration formation and reported satisfaction. I find that expectations and social comparisons significantly affect reported satisfaction, and that subjects care relatively more about social comparisons once they have achieved a satisfactory outcome. These findings support an aspirations-based theory of happiness.
    Keywords: Satisfaction; Happiness; Adaptation; Experiment
    JEL: C91 I31
    Date: 2007–03
  4. By: Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: According to existing theory, religion thrives when groups overcome the free-rider problem in the production of religious goods. This paper explains, however, that allowing some free-riding is necessary in a dynamic setting. If an individual only contributes when she has high religious capital, and if capital only forms after exposure to the religious good, then a church must allow her to temporarily free-ride in order to turn her into a future contributor. Free-riders comprise a risky but necessary investment by the church. Strict churches screen out riskier investments yet still allow some free-riding. This explanation yields predictions consistent with the empirical evidence.
    Keywords: Religion; Free-riding; Religious capital
    JEL: Z12 L31
    Date: 2007–06
  5. By: Namkee Ahn
    Abstract: Using the data from the Spanish survey on life quality at work, we examine the importance of intangible job characteristics in workers’ job and life satisfaction. Our analysis shows that on both job and life satisfaction, the combined monetary value of intangible job characteristics such as flexibility, independence, social usefulness, pleasant work environment, pride, stress and the perception of receiving an adequate wage, is several times more worthy than that of objective job characteristics such as wage, sector and hours of work. Furthermore, we find that some intangible job characteristics such as flexibility, work environment and stress affect directly workers’ life satisfaction rather than indirectly through their effects on job satisfaction.
  6. By: Jeffrey R. Brown; Zoran Ivkovich; Paul A. Smith; Scott Weisbenner
    Abstract: This paper establishes a causal relation between an individual's decision of whether to own stocks and average stock market participation decision of the individual's community. We instrument for the average ownership of an individual's community with lagged average ownership of the states in which one's non-native neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-by-year effects, rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities.
    JEL: G11
    Date: 2007–06
  7. By: Sääskilahti, Pekka
    Abstract: We analyse the roles of social network topology and size on the monopoly pricing of network goods in a market, where consumers interact with each other and are characterised by their social relations. The size effect is the well-known network externalities phenomenon, while the topological effect has not been previously studied in this context. The topological effect works against, and dominates, the size effect in monopoly pricing by reducing the monopoly's capacity to extract consumer surplus. Under asymmetric information about consumer types, the monopoly prefers symmetric network topologies, but the social optimum is an asymmetric network.
    Keywords: social relations; networks; coordination; monopoly
    JEL: L14 D42 D82
    Date: 2007
  8. By: Philippe Aghion; Alberto Alesina; Francesco Trebbi
    Abstract: We explore the question of how political institutions and particularly democracy affect economic growth. Although empirical evidence of a positive effect of democracy on economic performance in the aggregate is weak, we provide evidence that democracy influences productivity growth in different sectors differently and that this differential effect may be one of the reasons of the ambiguity of the aggregate results. We provide evidence that political rights are conducive to growth in more advanced sectors of an economy, while they do not matter or have a negative effect on growth in sectors far away from the technological frontier. One channel of explanation goes through the beneficial effects of democracy and political rights on the freedom of entry in markets. Overall, democracies tend to have much lower entry barriers than autocracies, because political accountability reduces the protection of vested interests, and entry in turn is known to be generally more growth-enhancing in sectors that are closer to the technological frontier. We present empirical evidence that supports this entry explanation.
    JEL: H7
    Date: 2007–06
  9. By: Pinto, Luis Santos
    Abstract: This paper studies how reciprocity and inequity aversion influence the behavior of firms in imperfectly competitive markets. The paper shows that if reciprocal firms compete à la Cournot, then they are able to sustain “collusive” outcomes under a positive reciprocity equilibrium. By contrast, Stackelberg warfare outcomes may emerge under a negative reciprocity equilibrium. The results for inequity aversion are similar. Cournot competition between inequity averse firms can be harmful to consumers if it leads to equilibria where firms feel compassion toward each other. However, in equilibria where inequity averse firms are envious of each other consumers are better off than if firms were selfish. The paper also shows that only under very restrictive conditions does reciprocity or inequity aversion have an impact on Bertrand competition. Finally, the paper shows that non-selfish preferences have a greater impact on equilibrium outcomes in markets with a small number of firms.
    Date: 2007

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