nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2012‒11‒11
thirteen papers chosen by
Fabio Sabatini
Universita' la Sapienza

  1. Trust and Cheating By Butler, Jeffrey V.; Giuliano, Paola; Guiso, Luigi
  2. Trust as the missing root of institutions, education, and development By Christian Bjørnskov; Pierre-Guillaume Méon
  3. Trust and Reciprocity, Empowerment and Transparency By Kiridaran Kanagaretnam; Stuart Mestelman; S. M. Khalid Nainar; Mohamed Shehata
  4. Social Capital and Repayment Performance of Group Lending in Microfinance By Luminita Postelnicu
  5. Social Capital in Decline: Friendly Societies in Australia, 1850-1914 By Arthur Downing
  6. Charitable Giving, Self-Image and Personality By Cueva, Carlos; Dessi, Roberta
  7. Institutions, trust and relations: a comparative analysis explaining informal economic activities By Adriaenssens, Stef; Hendrickx, Jef
  8. Actions with economic elements embedded in the social networks of Danish farmer investors abroad By Luljeta Hajderllari
  9. Social risk and ambiguity in the trust game By Fairley, Kim; Sanfey, Alan; Vyrastekova, Jana; Weitzel, Utz
  10. More than connectedness – Heterogeneity of CEO social network and firm value By Fang, Yiwei; Francis , Bill; Hasan, Iftekhar
  11. Students' Cheating as a Social Interaction: Evidence from a Randomized Experiment in a National Evaluation Program By Lucifora, Claudio; Tonello, Marco
  12. Italian mutual benefit societies: an organizational social innovation in health and healthcare system. By Rago, Sara
  13. Negative Reciprocity and Retrenched Pension Rights By Montizaan, Raymond; Cörvers, Frank; de Grip, Andries; Dohmen, Thomas

  1. By: Butler, Jeffrey V. (Einaudi Institute for Economics and Finance); Giuliano, Paola (University of California, Los Angeles); Guiso, Luigi (Einaudi Institute for Economics and Finance)
    Abstract: When we take a cab we may feel cheated if the driver takes an unnecessarily long route despite the lack of a contract or promise to take the shortest possible path. Is our decision to take the cab affected by our belief that we may end up feeling cheated? Is the behavior of the driver affected by his beliefs about what we consider cheating? We address these questions in the context of a trust game by asking participants directly about their notions of cheating. We find that: i) both parties to a trust exchange have implicit notions of what constitutes cheating even in a context without promises or messages; ii) these notions are not unique – the vast majority of senders would feel cheated by a negative return on their trust/investment, whereas a sizable minority defines cheating according to an equal split rule; iii) these implicit notions affect the behavior of both sides to the exchange in terms of whether to trust or cheat and to what extent. Finally, we show that individuals’ notions of what constitutes cheating can be traced back to two classes of values instilled by parents: cooperative and competitive. The first class of values tends to soften the notion while the other tightens it.
    Keywords: trust, trustworthiness, social norms, culture, cheating
    JEL: A1 A12 D1 O15 Z1
    Date: 2012–10
  2. By: Christian Bjørnskov; Pierre-Guillaume Méon
    Abstract: In the paper, we argue that trust is the missing link relating education, institutions, and economic development. We argue that increased trust both increases education and improves legal and bureaucratic institutions, which in turn spurs economic development. We substantiate this intuition with a series of regressions that show that trust determines both education and the quality of institutions, and that education and institutions in turn affect GDP per capita.
    Keywords: Development; Social trust; Institutions; Education
    JEL: O43 O47 O57 Z13
    Date: 2012–10–24
  3. By: Kiridaran Kanagaretnam; Stuart Mestelman; S. M. Khalid Nainar; Mohamed Shehata
    Abstract: In a laboratory-controlled environment characterized by uncertainty and incomplete information we provide experimental evidence on the effects of transparency and empowerment on trust (investment by a principal) and trustworthiness (reciprocal behavior of an agent) in a simple two-person investment game. We find that when principals are empowered by being able to punish agents who may not act in a way the principal believes is in the principal’s best interest, trust and investment increases over that which is realized in the absence of empowerment. We also find that when asymmetric or incomplete information characterizes the investment game the levels of trust (investment) are lower than when information is complete (the environment is transparent). In transparent environments the effect of empowerment is about the same regardless of whether empowerment is introduced or removed. However, in opaque environments, the loss of empowerment has a substantially greater negative effect on trust that the positive effect associated with the introduction of empowerment. While this environment is substantially abstracted from the naturally occurring environment, these results suggest that practical public policies designed to increase transparency in financial transactions are likely to have positive effects on investment. Furthermore, public policies designed to empower principals, such as the Say on Pay practices, are likely to increase investment while the limitation of the empowerment of principals with respect to their agents (consistent with deregulation) will have a much more dramatic negative impact on trust (and investment).
    Keywords: investment, empowerment, veto, trust, trustworthiness, reciprocity, say on pay
    JEL: C70 C91 D63 D81 D82
    Date: 2012–10
  4. By: Luminita Postelnicu
    Abstract: Conventional wisdom associates the success of microfinance group lending with joint liability only. Recent studies have pinpointed the role of social capital, around which the successful implementation of joint liability contracts seems to revolve. This paper brings together all relevant evidence on the effect of social capital on the repayment performance of microfinance group lending. I reconcile seemingly divergent views on the role of social capital by pointing out that authors measure different aspects of social capital. In particular, researchers use different proxies and different methodologies to measure social capital. I emphasize the need for a theoretical framework designed to fit social capital in the microfinance context, and I suggest avenues for future research in this field.
    Keywords: social capital; social ties; loan repayment performance; group lending
    JEL: Z13 G21 O12 O17 D71
    Date: 2012–10–30
  5. By: Arthur Downing (All Souls College, University of Oxford)
    Abstract: Participation in ‘friendly societies’ (or other cooperative organisations) is often used as proxy for measuring the stock of social capital. This is too simplistic. Friendly societies underwent radical changes over the nineteenth century and contemporaries regularly bemoaned that sociability, member participation and conviviality had been in steady decline over the second half of the century. This paper investigates the social relations between friendly society members. Part one looks at the importance of lynchpin ‘social capitalists’ in the functioning of lodges. Parts two and three examine how lodges generated social capital and how they relied on social network ties between members to function. Part four applies network analysis to proposition books to assess ‘intra’ lodge relationships between members. As friendly societies grew in size they became more business like. In turn the emphasis shifted from sociability and conviviality to insurance provision. In the process social capital was squandered, but the welfare function of these organisations was temporarily safeguarded.
    Date: 2012–10–03
  6. By: Cueva, Carlos (Univeristy Cambridge); Dessi, Roberta (IDEI, Toulouse School of Economics)
    Abstract: We provide an experimental test of the role of self-signaling in decisions to do- nate to charity. Our data strongly supports the theoretical prediction of a non- monotonic, hill-shaped relationship between self-confidence, proxied by the Social Potency personality trait, and prosocial behavior motivated by image concerns. Making self-image concerns more salient can more than double donations by indi- viduals with medium self-confidence.
    Keywords: charity, donations, prosocial behavior, self-signaling, self-image, personality, leadership, social norms, social potency.
    JEL: D01 D03 D64
    Date: 2012–10–11
  7. By: Adriaenssens, Stef (HUBrussel); Hendrickx, Jef (HUBrussel)
    Abstract: One often explains why people engage in the informal sector with the Allingham-Sandmo model, resting on taxation level, deterrence and risk aversion. This neoclassical approach explains noncompliance fairly well, but anomalies exist. Evenly parsimonious, Alejandro Portes develops a institutional and social capital approach introducing regulation, enforcement, and the social wiring of society. The extent of regulation fuels informal transactions, while effective enforcement inhibits it. Portes hypothesizes that informality is fostered by social relations and trust, and curbed by institutional trust. This paper tests Portes’ theory with data from the European Social Survey in 13 countries complemented with country level data on regulation and enforcement. Ordinary and multilevel logistic regressions largely confirm the predictions regarding regulation, institutional trust and social relations. The limited variation of enforcement in the countries studied and the measurement of social trust does not allow for a definitive assessment of the relevance of those variables.
    Keywords: Social trust; Institutional trust; Social capital; Underground activities; Regulation; Enforcement; Social relations; Social networks; Informal economy; Tax evasion
    Date: 2012–09
  8. By: Luljeta Hajderllari (Institute of Food and Resource Economics, University of Copenhagen)
    Abstract: The main aim of this paper is to investigate the “embeddedness” of business relationships with social relationships of Danish farmer investors (DFI) concerning agricultural investment and expansion abroad. A survey was sent to 61 DFIs with activities in Central and Eastern European countries who are members of an organisation named Danish Farmers Abroad. The survey elicited information regarding their organisational network connections to other DFIs who also have activities abroad. Information about the DFIs’ network was obtained regarding their business relationships (cooperation, competition and advice given and received to and from other DFIs) and social relationships (friendship). The data of the four different networks was analysed by the Double Dekker Semi-Partialling Multiple Regression Quadratic Assignment Procedure in UCINET. The results indicate that cooperation as well as received and given advice are positively related to social ties, whereas competition is negatively related to social ties. These results support the idea that business relationships (with the exception of competition) of DFIs are embedded in social relationships. This indicates that the same actors may behave less cooperatively in environments with low trust where they have to compete for scarce resources.
    Keywords: Embeddedness, social network analysis, Danish farmer investors
    JEL: M14 L22
    Date: 2012–10
  9. By: Fairley, Kim; Sanfey, Alan; Vyrastekova, Jana; Weitzel, Utz
    Abstract: Despite intensive research there is no clear evidence for a link between lottery risk preferences and risk involved in trusting others. We argue that this is partially due to a misalignment of the underlying sources of risk. Trusting is giving up control to a human source of risk while lottery risk has a mechanistic source. We propose a risky trust game that experimentally elicits social risk preferences that pertain to the same underlying human source. Our results show that transfers in the classic trust game are indeed best explained by social risk preferences and not by lottery risk preferences with an underlying mechanistic source. In addition, we argue that the type of uncertainty also plays a role. In the absence of objectively known probabilities of trustworthiness, trust also has an ambiguous component. We therefore decompose uncertainty in the trust game into social risk and an ambiguous component. Our results provide evidence that, when accounting for social risk, subjects who score high on ambiguity tolerance explain some of the remainder of trusting behavior.
    Keywords: Trust; trust game; decision making under uncertainty; risk; ambiguity; source of uncertainty
    JEL: C9 C7 D8
    Date: 2012–10–29
  10. By: Fang, Yiwei (Lally School of Management and Technology, Rensselaer Polytechnic Institute); Francis , Bill (Lally School of Management and Technology, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland Research)
    Abstract: This paper examines through various channels the effects of CEO social network heterogeneity on firm value. We construct four measures of heterogeneity based on demographic attributes, intellectual backgrounds, professional experience, and geographical exposures of individuals in the CEO social network. We find that CEO social network heterogeneity leads to higher Tobin's Q of firms. Greater CEO social network heterogeneity also leads to: (i) more innovation, (ii) more foreign sales growth, (iii) higher investment sensitivity to Tobin’s Q, and (iv) better M&A performance. Overall, our results indicate that CEO social network heterogeneity is an aspect of CEO social capital and soft skills that deserves the attention of shareholders.
    Keywords: CEO; social networks; corporate finance policy decisions; firm value
    JEL: D71 G30 G32 Z10
    Date: 2012–08–20
  11. By: Lucifora, Claudio (Università Cattolica del Sacro Cuore); Tonello, Marco (Catholic University Milan)
    Abstract: We analyze students' cheating behavior during a national evaluation test. We model the mechanisms that trigger cheating interactions between students and show that, when monitoring is not sufficiently accurate, a social multiplier may magnify the effects on students' achievements. We exploit a randomized experiment, which envisaged the presence of an external inspector in the administration and marking of the tests, to estimate a structural (endogenous) social multiplier in students' cheating. The empirical strategy exploits the Excess-Variance approach (Graham, 2008). We find a strong amplifying role played by social interactions within classrooms: students' cheating behaviors more than double the class average test scores results. The effects are found to be larger when students are more homogeneous in terms of parental background characteristics and social ties.
    Keywords: social multiplier, students' cheating, randomized experiment
    JEL: C31 D62 I21
    Date: 2012–10
  12. By: Rago, Sara (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: The paper aims to analyse the role covered by “Mutual Benefit Societies” (hereinafter MBSs – it. trans. “Mutue Sanitarie Integrative”) in terms of “social innovation” within the on-going changing of Italian welfare system. In fact, several of these organisations survived the last three decades despite the establishment of the National Health Service (NHS) by Italian Law no. 833/1978. The law also allowed for the possibility to supplement services provided within the public system by private insurers, including MBSs. The opportunity for MBSs to establish supplementary health funds aimed at providing supplementary coverage has been confirmed by the Legislative Decree no. 502/1992 and subsequent amendments. As the crisis of the public welfare system, MBSs working in health and social risks areas currently deal with both challenges and opportunities. The added value of MBSs emerges especially in high level social and health content services (e.g., long term care – LTC – services). It is related to the ability in linking economic (efficiency), social (relationships network inside MBSs – both with members and staff), cultural (connected with principles and values of their mission), and institutional (in terms of generation of social capital – external relationships) sides. MBSs are a subsidiary and supplementary tool to already existing welfare policies addressing the demand for the integration of health and welfare costs. The shared goal is to combine the universality of welfare and the economic sustainability of the system, taken from the perspective of social innovation founded in civil society involvement. As “social innovation” is the application of new ideas on a product, process, or organisational arrangements producing an outcome or a stable and positive change in the level of well-being of a society or part of it through the creation of social added value, in the case of Italian MBSs, social innovation emerges from their organisational structure through which they are able to link the demand and supply of health. MBSs are able to tackle better than other types of organisations the problems of redefining intervention policies as they can organise it in a flexible way that more closely reflects needs and desires of members. This paper is based on data collected through the administration of a survey questionnaire sent to a sample of 20 Italian MBSs working in health and healthcare fields.
    Keywords: mutual benefit society; welfare; health/healthcare; social innovation; added value.
    JEL: I31 L31
    Date: 2012–09–21
  13. By: Montizaan, Raymond (ROA, Maastricht University); Cörvers, Frank (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Dohmen, Thomas (ROA, Maastricht University)
    Abstract: We document the importance of negatively reciprocal inclinations in labor relationships by showing that a retrenchment of pension rights, which is perceived as unfair, causes a larger reduction in job motivation the stronger workers' negatively reciprocal inclinations are. We exploit unique matched survey and administrative data on male employees in the public sector in the Netherlands and compare the job motivation of employees born in 1950, who faced a substantial retrenchment of their pension rights resulting from a pension reform in 2006, to that of slightly older employees who remain entitled to more generous pension benefits. Job motivation is significantly lower among negatively reciprocal employees who were affected by the reform. The negative effect on job motivation is greater for negative reciprocal employees born very shortly after the cut-off date of January 1, 1950, as well as for those with many untreated colleagues, and who therefore arguably perceive the policy change as being more unfair. We also find that the treatment effect is stronger among workers who are more likely to hold their employer accountable for the drop in their pension rights, that is, those who work for the national government.
    Keywords: reciprocity, job motivation, retrenchment of pension rights
    JEL: D63 J2
    Date: 2012–10

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