nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2008‒09‒29
sixteen papers chosen by
Fabio Sabatini
University of Siena

  1. The Impact of Trust on Reforms By Heinemann, Friedrich; Tanz, Benjamin
  2. Altruism, Favoritism, and Guilt in the Allocuation of Family Resources: Sophie's Choice in Mao's Mass Send Down Movement By Hongbin Li; Mark Rosenzweig; Junsen Zhang
  3. Vulnerability, Trust and Microcredit: The Case of China?s Rural Poor By Turvey, Calum G.; Kong, Rong
  4. Is mistrust self-fulfilling? By Reuben, Ernesto; Sapienza, Paola; Zingales, Luigi
  5. Neighborhood Diversity Characteristics in Iowa and their Implications for Home Loans and Business Investment By Eathington, Liesl; Swenson, David A.
  6. Distribution of Wealth and Interdependent Preferences By Grodner, Andrew; Kniesner, Thomas J.
  7. Non-Profit Organizations in a Bureaucratic Environment By Grout, Paul; Schnedler, Wendelin
  8. An experimental study of asymmetric reciprocity By Omar Al-Ubaydli; Min Sok Lee
  9. The Efficiency and Evolution of R&D Networks By Michael D. König; S. Battiston; M. Napoletano; F. Schweitzer
  10. Intangible Capital and International Income Differences By Aamir Rafique Hashmi
  11. The Feedback-Seeker in his Social Labyrinth: The mediating role of goals and cooperative norms in linking empowering leadership to feedback-seeking behavior By K. E. M. DE STOBBELEIR; S. J. ASHFORD; D. BUYENS
  12. Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment By Juan Alcacer; Paul Ingram
  14. Peer Effects and Human Capital Accumulation: the Externalities of ADD By Anna Aizer
  15. Happiness, unhappiness, and suicide: an empirical assessment By Mary C. Daly; Daniel J. Wilson

  1. By: Heinemann, Friedrich; Tanz, Benjamin
    Abstract: In a constantly changing economic environment a country's ability to undertake institutional reforms is crucial to maintain economic growth and to promote the welfare of its citizens. A wide range of determinants for institutional reforms have been identified. However, the impact of trust on reforms has so far never been addressed. We provide theoretical arguments why trust should influence institutional changes and test the relationship empirically. We find a significant positive relation between trust and reforms with regard to government size, the legal system, and deregulation of private businesses and the labor market. The results in other policy fields are ambiguous.
    Keywords: Trust, Economic Freedom, Policy Reforms
    JEL: E60 H11
    Date: 2008
  2. By: Hongbin Li (Tsinghua University); Mark Rosenzweig (Yale University); Junsen Zhang (Chinese University of Hong Kong)
    Abstract: In this paper, we use new survey data on twins born in urban China, among whom many experienced the consequences of the forced mass rustication movement of the Chinese “cultural revolution,” to identify the distinct roles of altruism and guilt in affecting behavior within families. Based on a model depicting the choices of the allocation of parental time and transfers to multiple children incorporating favoritism, altruism and guilt, we show the conditions under which guilt and altruism can be separately identified by experimental variation in parental time with children. Based on within-twins estimates of affected cohorts, we find that parents selected children with lower endowments to be sent down; that parents behaved altruistically, providing more gifts to the sibling with lower earnings and schooling; but also exhibited guilt – given the current state variables of the two children, the child experiencing more years of rustication received significantly higher transfers.
    Keywords: guilt, altruism, China
    JEL: J12 J13 O12
    Date: 2008–09
  3. By: Turvey, Calum G.; Kong, Rong
    Abstract: This paper investigates the economic conditions of rural households in China. Historical survey data indicate that over 80 per cent of rural households earn less than 4,500 yuan in net disposable income each year, that for the vast majority of rural households disposable income is insufficient to meet food consumption needs, and that in terms of economic growth rural households are receiving an ever decreasing percentage of China?s growing economy with rural household incomes being only 31 per cent of urban household income in 2004. To reduce vulnerability and food insecurity, this paper investigates the role of microcredit in China. It is argued that in China the conventional wisdom is to provide credit using traditional means, but we provide a model that shows how a microcredit market based on trust can co-exist with a commercial collateral-based market. This model is developed in detail and certain propositions are supported using dominant strategies in a trust-honour game based on the prisoner?s dilemma. The theoretical model is then applied to the case of microlending in China. It explains why, in the absence of trust, rural credit corporations do not make loans to the very poor. Furthermore, the model explains how Central party policies on rural credit can actually crowd out micro finance institution (MFI) and NGO microlending in China, and also explains why moneylenders dominate in many of the poorer regions of the country. From a policy point of view, the theoretical model indicates that trust-based lending, coupled with certain incentives, can go far in supporting growth opportunities in rural China. It is argued that Chinese policy should be flexible enough to permit trust-based microlending to the poor, regardless of how counterintuitive this must appear to the conventional wisdom. Indeed, in the absence of flexible credit strategies, China?s rural poor will remain in a persistent food-insecure poverty gap.
    Keywords: equilibrium, game theory, rural, credit, China
    Date: 2008
  4. By: Reuben, Ernesto; Sapienza, Paola; Zingales, Luigi
    Abstract: We study experimentally the effect of expectations on trustworthiness. Most subjects respond with untrustworthy behavior if they find out that little is expected from them. This suggests that guilt aversion plays an important role in inducing trustworthiness.
    Keywords: trust; trustworthiness; reciprocity; guilt aversion
    JEL: C92 Z13 C72
    Date: 2008–05
  5. By: Eathington, Liesl; Swenson, David A.
    Abstract: The geographic concentration of the state’s minority population within a relatively small number of diverse neighborhoods suggests an additional important dimension for analysis and begs an important question: How do these racially and ethnically diverse neighborhoods differ from less diverse areas of the state? Furthermore, what are the implications for these concentrations of racial or ethnic diversity for homeownership and business development?
    JEL: R0
    Date: 2008–09–17
  6. By: Grodner, Andrew (East Carolina University); Kniesner, Thomas J. (Syracuse University)
    Abstract: We examine the socially optimal wealth distribution in a two-person two-good model with heterogeneous workers and asymmetric social interactions where only one (social) individual derives positive or negative utility from the leisure of the other (non-social) individual. We show that the interdependence can effectively counter-act the need to transfer wealth to low-wage individuals and may require them to be poorer by all objective measures. We demonstrate that in the presence of social interactions it can be socially desirable to keep substantial wealth inequality.
    Keywords: wealth inequality, earnings inequality, social welfare, social interactions
    JEL: D31 D63
    Date: 2008–09
  7. By: Grout, Paul (University of Bristol); Schnedler, Wendelin (University of Heidelberg)
    Abstract: How does the environment of an organization influence whether workers voluntarily provide effort? We study the power relationship between a non-profit unit (e.g. university department, NGO, health trust), where workers care about the result of their work, and a bureaucrat, who supplies some input to the non-profit unit, but has opportunity costs in doing so (e.g. Dean of faculty, corrupt representative, government agency). We find that marginal changes in the balance of power eventually have dramatic effects on donated labor. We also identify when strengthening the non-profit unit decreases and when it increases donated labor.
    Keywords: donated labor, intrinsic motivation, non-profit organizations, power within organizations
    JEL: L30 M50 H10 H40
    Date: 2008–09
  8. By: Omar Al-Ubaydli (Department of Economics and Mercatus Center, George Mason University); Min Sok Lee
    Abstract: Do people have a stronger propensity to reward or punish? When reacting to intentions, Offerman (2002) concluded that people punish more. Using the Falk and Fischbacher (2006) model, we extend Offerman's design in two ways. First, we control for the strength of the positive/negative intentions to which an individual reacts when rewarding/punishing. Second, we can precisely compare the strength of intention- and distribution-based motives for reward/punishment. Doing so requires measuring second-order expectations of subjects' own behavior, i.e., what a subject predicts that other subjects predict that he will do. Second-order expectations can be elicited directly or they can be induced by telling a subject what others expect him to do.Under elicited second-order expectations, we find that negative reciprocity is stronger than positive reciprocity, though if we isolate the distributional motive for reciprocity, then we find that positive reciprocity is stronger than negative reciprocity. Under induced second-order expectations, positive distributional reciprocity is stronger than negative distributional reciprocity while other forms of reciprocity are equally strong.
    Keywords: reciprocity, reward, punishment
    Date: 2008–07
  9. By: Michael D. König (Chair of Systems Design, ETH Zurich, Switzerland); S. Battiston (Chair of Systems Design, ETH Zurich, Switzerland); M. Napoletano (Chair of Systems Design, ETH Zurich and Observatoire Français des Conjonctures Economiques, Department for Research on Innovation and Competition, Valbonne, France); F. Schweitzer (Chair of Systems Design, ETH Zurich, Switzerland)
    Abstract: This work introduces a new model to investigate the efficiency and evolution of networks of firms exchanging knowledge in R&D partnerships. We first examine the efficiency of a given network structure in terms of the maximization of total profits in the industry. We show that the efficient network structure depends on the marginal cost of collaboration. When the marginal cost is low, the complete graph is efficient. However, a high marginal cost implies that the efficient network is sparser and has a core-periphery structure. Next, we examine the evolution of the network struc- ture when the decision on collaborating partners is decentralized. We show the existence of mul- tiple equilibrium structures which are in general inefficient. This is due to (i) the path dependent character of the partner selection process, (ii) the presence of knowledge externalities and (iii) the presence of severance costs involved in link deletion. Finally, we study the properties of the emerg- ing equilibrium networks and we show that they are coherent with the stylized facts of R&D net- works.
    Keywords: R&D networks, technology spillovers, network efficiency, network formation
    JEL: D85 L24 O33
    Date: 2008–09
  10. By: Aamir Rafique Hashmi (Department of Economics, National University of Singapore)
    Abstract: I add intangible capital to a variant of the neoclassical growth model and study the implications for cross-country income differences. I calibrate the parameters associated with intangible capital by using new estimates of investment in intangibles by Corrado et al. (2006). When intangible capital is added to the model, the TFP elasticity of output increases from 2.14 to 2.64. This finding implies that the addition of intangible capital increases the ability of the neoclassical growth model to explain international income differences by more than a factor of two.
    Keywords: International Income Differences; Intangible Capital
    JEL: O33 O41 O47
    Date: 2008–06
    Abstract: This study examines the intra-personal and interpersonal mechanisms through which empowering leaders impact their followers’ selection of feedback sources. Drawing on goal theories and the group-norms literature, we developed and tested an individual and multilevel model of feedback-seeking behavior. Using a sample of 991 employees, working in 185 teams, we found that empowering leaders indirectly influenced their followers’ selection of feedback sources by encouraging autonomous goal pursuit and cooperative group norms.
    Date: 2008–09
  12. By: Juan Alcacer (Harvard Business School, Strategy Unit); Paul Ingram (Columbia Business School, Columbia University)
    Abstract: Global economic transactions such as foreign direct investment must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs), whose members are states, represent an important attempt to span this abyss. IGOs are mandated variously to smooth economic transactions, facilitate global cooperation, and promote cultural contact and awareness. We use a network approach to demonstrate that the connections between two countries through joint-membership in the same IGOs are associated with a large positive influence on the foreign direct investment that flows between them. Moreover, we show that this effect occurs not only in the case of IGOs that focus on economic issues, but also on those with social and cultural mandates. This demonstrates that relational governance is important and feasible in the global context, and for the most risky transactions. Finally we examine the interdependence between the IGO network and the domestic institutions of states. The interdependence between these global and domestic institutional forms is complex, with target-country democracy being a substitute for economic IGOs, but a compliment for social and cultural IGOs.
    Date: 2008–08
  13. By: Anneli Kaasa; Maaja Vadi
    Abstract: Culture is deemed to be a crucial basis for innovation in various respects. The aim of this paper is to explore the relationships between different cultural dimensions introduced by Hofstede (2001) and the capability of initiating innovation measured by the number of patent applications using the sample of European countries at the regional level. As a novel approach, instead of using Hofstede’s original index scores, the measures for the cultural dimensions are based on the European Social Survey (ESS). We have learned that to be successful in patenting, a region should have power distance, uncertainty avoidance, family-related collectivism (as opposed to friend-related and organisation-related collectivism) and lower than average masculinity. In addition, the negative relationships between these cultural dimensions and patenting are stronger when there is a higher patenting intensity. However, culture alone does not serve as a guarantee for a high level of patenting intensity.
    Keywords: innovation, culture, Europe
    Date: 2008
  14. By: Anna Aizer
    Abstract: Although recent work has shown that peers affect human capital accumulation, the mechanisms are not well understood. Knowing why high achieving peers matter, because of their innate ability, disciplined behavior or some other factor, has important implications for our understanding of the education production function and for how we organize schools and classrooms. In this paper I provide evidence that peer behavior is an important mechanism. To identify the impact of peer behavior on achievement separate from ability or other characteristics, I exploit exogenous improvements in classmates' inattention/impulsivity that result from a diagnosis of ADD. After children with ADD are diagnosed, I show that their behavior improves, but that no other characteristics, including achievement, change. I find that peer behavior significantly affects cognitive achievement and that resources such as class size can overcome the negative peer effects observed, consistent with the model of education production proposed by Lazear (2001). These findings have important implications for our understanding not only of peer effects but also of the relationship between health, productivity and growth.
    JEL: I1 I18 I2
    Date: 2008–09
  15. By: Mary C. Daly; Daniel J. Wilson
    Abstract: The use of subjective well-being (SWB) data for investigating the nature of individual preferences has increased tremendously in recent years. There has been much debate about the cross-sectional and timeseries patterns found in these data, particularly with respect to the relationship between SWB and relative status. Part of this debate concerns how well SWB data measures true utility or preferences. In a recent paper, Daly, Wilson, and Johnson (2007) propose using data on suicide as a revealed preference (outcome-based) measure of well-being and find strong evidence that reference-group income negatively affects suicide risk. In this paper, we compare and contrast the empirical patterns of SWB and suicide data. We find that the two have very little in common in aggregate data (time series and cross-sectional), but have a strikingly strong relationship in terms of their determinants in individual-level, multivariate regressions. ; This latter result cross-validates suicide and SWB micro data as useful and complementary indicators of latent utility.
    Date: 2008
  16. By: Emma Galli; Veronica Grembi; Fabio Padovano (University of Rome 3, (Italy))
    Abstract: This paper evaluates the erosion of electoral accountability of the “Governors” of the Italian Regions in three subsequent political moments: 1) the elections; 2) the inaugural speeches of the Governor; 3) their first important policy decision, the long-term regional budget (DPEFR). We use content analysis (Laver et al., 2003) to assess the position of each Governor on a left to right distribution at the moment of the inaugural speeches and of the DPEFR. We then analyze the correlation between the distributions of 1) the electoral results and the inaugural speeches and 2) the inaugural speeches and the DPEFR, under the hypothesis that greater similarity can be interpreted as greater accountability. The analysis detects some erosion of accountability from the elections to the inaugural speeches, and a more serious one from the inaugural speeches to the DPEFR. A series of ANOVA tests suggests that the Region’s relative economic position/dependency on transfers from the central governments partly explains such loss of accountability.
    Date: 2008

This nep-soc issue is ©2008 by Fabio Sabatini. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.