nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2009‒07‒11
eleven papers chosen by
Fabio Sabatini
University of Siena

  1. The Organization of Firms Across Countries By Bloom, Nicholas; Sadun, Raffaella; Van Reenen, John
  2. Moral and Social Constraints to Strategic Default on Mortgages By Luigi Guiso; Paola Sapienza; Luigi Zingales
  3. A growth model with time allocation and social participation By Bassetti, Thomas; Favaro, Donata
  4. A multiplicity of approaches to institutional analysis. Applications to the government and the arts By Bruno S. Frey
  5. Trust, Introspection, and Market Participation: an Evolutionary Approach By Adriani, Fabrizio; Sonderegger, Silvia
  6. Social Norms, Information and Trust among Strangers: Theory and Evidence By John Duffy; Huan Xie; Yong-Ju Lee
  7. Secret Santa: Anonymity, Signaling, and Conditional Cooperation By David Hugh-Jones; David Reinstein
  8. Industrial district effects and innovation in the Tuscan shipbuilding industry By Luciana Lazzeretti; Francesco Capone
  9. Measuring Norms of Redistributive Transfers: Trust Experiments and Survey Data from Vietnam By Tanaka, Tomomi; Camerer, Colin; Nguyen, Quang
  10. Forms, importance and working of social institutions By Martti Vihanto
  11. The evolution of knowledge base in knowledge-intensive sectors: Social Network analysis of Biotechnology By Krafft Jackie; Quatraro Francesco; Saviotti Paolo

  1. By: Bloom, Nicholas; Sadun, Raffaella; Van Reenen, John
    Abstract: We argue that social capital as proxied by regional trust and the Rule of Law can improve aggregate productivity through facilitating greater firm decentralization. We collect original data on the decentralization of investment, hiring, production and sales decisions from Corporate Head Quarters to local plant managers in almost 4,000 firms in the US, Europe and Asia. We find Anglo-Saxon and Northern European firms are much more decentralized than those from Southern Europe and Asia. Trust and the Rule of Law appear to facilitate delegation by improving co-operation, even when we examine "bilateral trust" between the country of origin and location for affiliates of multinational firms. We show that areas with higher trust and stronger rule of law specialize in industries that rely on decentralization and allow more efficient firms to grow in scale. Furthermore, even for firms of a given size and industry, trust and rule of law are associated with more decentralization which fosters higher returns from information technology (we find IT is complementary with decentralization). Finally, we find that non-hierarchical religions and product market competition are also associated with more decentralization. Together these cultural, legal and economic factors account for four-fifths of the cross-country variation in the decentralization of power within firms.
    Keywords: decentralization; Rule of Law; social capital; theory of the firm; trust
    JEL: L2 M2 O32 O33
    Date: 2009–06
  2. By: Luigi Guiso; Paola Sapienza; Luigi Zingales
    Abstract: We use survey data to study American households’ propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household would default if the equity shortfall is less than 10% of the value of the house. Yet, 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50% of the value of their house. Besides relocation costs, the most important variables in predicting strategic default are moral and social considerations. Ceteris paribus, people who consider it immoral to default are at 77% less likely to declare their intention to do so, while people who know someone who defaulted are 82% more likely to declare their intention to do so. The willingness to default increases nonlinearly with the proportion of foreclosures in the same ZIP code. That moral attitudes toward default do not change with the percentage of foreclosures is likely to derive from a contagion effect that reduces the social stigma associated with default as defaults become more common.
    JEL: D12 G18 G21 G33
    Date: 2009–07
  3. By: Bassetti, Thomas; Favaro, Donata
    Abstract: In this article we propose a model of growth with human capital accumulation, in which individuals allocate their time among work, education and socio-political participation. Socio-political participation, while subtracting time to education, positively affects individual’s utility; the utility function depends on both consumption and time allocated to socio-political participation. The model is expanded to include two social groups, specifically women and men, whose values and targets are different; every individual engages in socio-political activities to socially establish the values of the group she/he belongs to and his utility will be greater the more the society has values similar to those of the belonging group. The model predicts that economies with a more egualitarian presence of females and males in employment and higher population growth rates converge to a stationary state where time allocated to working activities is lower and time for education is higher. We simulate the model on some European countries with different female/male employment rates, population growth rates and capital shares. Simulations confirm the empirical evidence: European countries with a more equal presence of women and men in the labour market experience higher education attainment rates, allocate a higher proportion of time to social participation, and work, on average, a lower number of hours than countries with a lower relative proportion of females in employment.
    Keywords: human capital; growth; socio-political participation; social groups; gender
    JEL: O1 J22 J24
    Date: 2009
  4. By: Bruno S. Frey
    Abstract: Four types of “economics” relevant for institutional analysis are distinguished: Standard Neoclassical Economics; Socio-Economics or Social Economics; New Institutional Economics; and Psychological Economics (often misleadingly called Behavioural Economics). The paper argues that an extension of Neoclassical Economics with elements from other social sciences (including political science, sociology, psychology, law and anthropology) is fruitful to explain institutions because it allows us to maintain the strength of that approach. Social Economics can play an important role helping to overcome the limitations of Neoclassics. However, it should become more concrete, integrate what is useful in Neoclassics, and should seriously engage in empirical research.
    Keywords: Institutional Economics, Neoclassics, Psychological Economics, Behavioural Economics, institutions.
    JEL: Z11 H77 P16
    Date: 2009–06
  5. By: Adriani, Fabrizio; Sonderegger, Silvia
    Abstract: We build a model where introspection matters - i.e., people rationally form expectations about others using the lens of their own attitudes. Since trustworthy individuals are more "optimistic" about people than opportunists, they are less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behavior. Within this context, we use an indirect evolutionary approach to endogenize preferences for trustworthiness. In some cases, the material rewards from greater market participation may outweigh the material disadvantages from foregoing lucrative expropriation opportunities. This implies that trustworthiness may be evolutionary stable in the long-term. Although stricter enforcement (that limits the scope for opportunistic behavior) does in some cases favor preferences for trustworthy behavior (crowding in) we show that the opposite (crowding out) may also occur. Our findings are consistent with recent empirical evidence.
    Keywords: Endogenous Preferences; Trust; Introspection; Institutions; Enforcement; Crowding Out
    JEL: D81 D02 Z13 D82 C73
    Date: 2009–07
  6. By: John Duffy; Huan Xie; Yong-Ju Lee
    Abstract: How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen so as to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and how long that history must be. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
    JEL: C72 C91 C92
    Date: 2009–07
  7. By: David Hugh-Jones (Max Planck Institute for Economics, Jena); David Reinstein (Department of Economics, Essex University)
    Abstract: Costly signaling of commitment to a group has been proposed as an explanation for participation in religion and ritual. But if the signal's cost is too small, freeriders will send the signal and behave selflshly later. Effective signaling may then be prohibitively costly. If the average level of signaling in a group is observable, but individual effort is not, then freeriders can behave selflshly without being detected, and group members will learn about the average level of commitment among the group. We develop a formal model, and give examples of institutions that enable anonymous signaling, including ritual, religion, music and dance, voting, charitable donations, and military institutions. We explore the value of anonymity in the laboratory with a repeated two-stage public goods game with exclusion. When first-stage contributions are anonymous, subjects are better at predicting second-stage behavior, and maintain a substantially higher level of cooperation.
    Keywords: signaling, anonymity, public goods
    JEL: H41
    Date: 2009–07–02
  8. By: Luciana Lazzeretti (Department of Bussines Economics, University of Florence); Francesco Capone (Department of Bussines Economics, University of Florence)
    Abstract: The aim of the present work is to investigate innovative processes within a geographical cluster, and thus contribute to the debate on the effects of industrial clusters on innovation capacity. In particular, we would like to ascertain whether the advantages of industrial districts in promoting innovation, as already revealed by literature (diffusion of knowledge, social capital and trust, efficient networking), are also keys to success in the Tuscan shipbuilding industry of pleasure and sporting boats. First, we verify the existence of clusters of shipbuilding in Tuscany, using a specific methodology. Next, in the identified clusters, we analyse three innovative networks financed in a policy to support innovation, and examine whether the typical features of a cluster for promoting innovation are at work, using a questionnaire administered to 71 actors. Finally, we develop a performance analysis of the cluster firms and ascertain whether their different behaviours also lead to different performances. The analysis results show that our case records effects of industrial clustering on innovation capacity, such as the important role given to trust and social capital, the significant worth put in interfirm relations and in each partner’s specific competencies, or even the distinctive performance of firms belonging to a cluster.
    Keywords: geographical clusters, industrial districts, innovation, technological transfer, shipbuilding industry.
    JEL: L22 O32 L62
    Date: 2009–05
  9. By: Tanaka, Tomomi; Camerer, Colin; Nguyen, Quang
    Abstract: This paper compares the social norms of distributive transfers within village communities in the north and south of Vietnam by analyzing household survey and experimental data. The results of household data analysis show private transfers flow from high-income households to low-income households in the south where social safety net is limited. In contrast, private transfers do not correlate with pre-transfer income in the north where public transfers are more widespread. In addition, public transfers crowd out private transfers in the north. We conducted trust game in both regions and found consistent results. People in the south are more altruistic toward the poor: they send more to the poor without expecting higher repayment. This pattern is consistent with the idea that private norms of redistribution from rich to poor are active in the south but are crowded out in the north, possibly by communist public institutions, although we observe a strong overall positive effect of communism on reciprocity in the north.
    Keywords: Field experiment; Trust; Vietnam
    JEL: D81 D64 C93
    Date: 2009–07–07
  10. By: Martti Vihanto (Department of Economics, Turku School of Economics)
    Abstract: Social institutions are persistent regularities in contracting and other relations amongst men and in the unintended consequences of such rule-like behavior. They include morality and law as well as institutions of governance such as branding and advertising. Institutions are studied in all approaches and schools of economics, and each involves its peculiar emphases. The purpose of the paper is to give an overview of the forms, importance and working of social institutions by taking examples from decision making of consumers. Use is made in particular of the findings of transaction-cost, evolutionary and behavioral economics. The paper is part of a Finnish open access textbook Principles of Institutional Economics in progress (
    Keywords: social institutions, institutional economics, transaction costs, heuristic behavior
    JEL: B52 D11 D02
    Date: 2009–05
  11. By: Krafft Jackie (GREDEG (Groupe de Recherche en Droit, Economie et Gestion)); Quatraro Francesco (University of Turin); Saviotti Paolo (Unité Mixte de Recherche GAEL (Laboratoire d'Economie Appliquée de Grenoble))
    Abstract: This paper applies the methodological tools typical of social network analysis within an evolutionary framework, to investigate the dynamics of the knowledge base of the biotechnology sector. Knowledge is here considered a collective good represented as a co-relational and a retrieval-interpretative structure. The internal structure of knowledge is described as a network the nodes of which are small units within traces of knowledge, such as patent documents, connected by links determined by their joint utilisation. We used measures referring to the network, like density, and to its nodes, like degree, closeness and betweenness centrality, to provide a synthetic description of the structure of the knowledge base and of its evolution over time.Eventually, we compared such measures with more established properties of the knowledge base calculated on the basis of co-occurrences of technological classes within patent documents. Empirical results show the existence of interesting and meaningful relationships across the different measures, providing support for the use of social network analysis to study the evolution of the knowledge bases of industrial sectors and their lifecycles.
    Date: 2009–07

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