nep-soc New Economics Papers
on Social Norms and Social Capital
Issue of 2016‒09‒04
sixteen papers chosen by
Fabio Sabatini
Università degli Studi di Roma “La Sapienza”

  1. Networks: An economic perspective By Jackson, Matthew O.; Rogers, Brian; Zenou, Yves
  2. A Theory of Community Formation and Social Hierarchy By Susan Athey; Emilio Calvano; Saumitra Jha
  3. Culture vs. Bias: Can Social Trust Mitigate the Disposition Effect? By Li, Jennifer; Massa, Massimo; Zhang, Hong
  4. Cooperation and Mistrust in Relational Contracts By Holger Herz; Armin Schmutzler; André Volk
  5. The Chips Are Down: The Influence of Family on Children's Trust Formation By Corrado Giulietti; Enrico Rettore; Sara Tonini
  6. Elections, protest and trust in government: A natural experiment from Russia By Frye, Timothy; Borisova, Ekaterina
  7. The Tragedy of Corruption By Chen, Yefeng; Jiang, Shuguang; Villeval, Marie Claire
  8. Social Capital, Trust and Well-being in the Evaluation of Wealth By Kirk Hamilton; John F. Helliwell; Michael Woolcock
  9. Who Trusts Others? Community and Individual Determinants of Social Capital in a Low Income Country By Asadullah, Niaz
  10. Institutions Without Culture. A Critique of Acemoglu and Robinson's Theory of Economic Development By Joanna Dzionek-Kozlowska; Rafal Matera
  11. Beyond the personal-anonymous divide: Agency relations in powers of attorney in France, 18th–19th centuries By Fabien Eloire; Claire Lemercier; Veronica Aoki Santarosa
  12. Trust, ambiguity, and financial decision-making By Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
  13. Coevolution of cooperation, preferences, and cooperative signals in social dilemmas By Müller, Stephan; von Wangenheim, Georg
  14. Peer Effects in Parental Leave Decisions By Welteke, Clara; Wrohlich, Katharina
  15. The impact of terrorism on expectations, trust and happiness. The Case of the November 13 attacks in Paris, France By Tom Coupe
  16. Relational capital in lending relationships: Evidence from European family firms By Marco Cucculelli; Valentina Peruzzi; Alberto Zazzaro

  1. By: Jackson, Matthew O.; Rogers, Brian; Zenou, Yves
    Abstract: We discuss social network analysis from the perspective of economics. We organize the presentation around the theme of externalities: the effects that one's behavior has on others' welfare. Externalities underlie the interdependencies that make networks interesting to social scientists. We discuss network formation, as well as interactions between peoples' behaviors within a given network, and the implications in a variety of settings. Finally, we highlight some empirical challenges inherent in the statistical analysis of network-based data.
    Keywords: economic networks; externalities; Game theory; network formation; network games; Networks; peer effects; Social Networks
    JEL: C72 D85 L14 Z13
    Date: 2016–08
  2. By: Susan Athey (Stanford GSB); Emilio Calvano (Università di Bologna and CSEF); Saumitra Jha (Stanford GSB)
    Abstract: We analyze the classic problem of sustaining trust when cheating and leaving trading partners is easy, and outside enforcement is difficult. We construct equilibria where individuals are loyal to smaller groups – communities - that allow repeated interaction. Hierarchies provide incentives for loyalty and allow individuals to trust agents to extent that the agents are actually trustworthy. We contrast these with other plausible institutions for engendering loyalty that require inefficient withholding of trust to support group norms, and are not robust to coalitional deviations. In communities whose members randomly match, we show that social mobility within hierarchies falls as temptations to cheat rise. In communities where individuals can concentrate their trading with pre-selected members, hierarchies where senior members are favored for trade sustain trust even in the presence of proximate non-hierarchical communities. We link these results to the emergence of trust in new market environments and early human societies
    Date: 2016–08–26
  3. By: Li, Jennifer; Massa, Massimo; Zhang, Hong
    Abstract: We examine whether the investors sensitivity to behavioral biases is influenced by the social norms they are exposed to. We focus on the disposition effect of mutual fund investors. We consider two competing hypotheses. On the one hand, trust, by increasing the credibility of the numbers reported by the fund managers elicits stronger investor reactions. This results in a higher flow-performance sensitivity, which mitigates the tendency of selling winners and holding onto losers. One the other hand, societal trust, reducing the concern of expropriation, lowers the necessity for investors to react to bad performance. The resulting lower flow-performance sensitivity increases the disposition effect. Based on a proprietary dataset of the complete account-level trading information for all investors of a mutual fund family in China, we find compelling evidence that: 1) fund investors exhibit disposition effect; 2) a higher degree of social trust is associated with higher flow-performance-sensitivity; 3) (high) trust-induced flows mitigate the disposition effect. Our results suggest that behavioral bias may be strongly influenced by social norms.
    Keywords: Mutual funds; The Disposition Effect; Trust
    Date: 2016–08
  4. By: Holger Herz; Armin Schmutzler; André Volk
    Abstract: Work and trade relationships are often governed by relational contracts, in which incentives for cooperative action today stem from the prospective future benefits of the relationship. In this paper, we study how reductions in clarity about the financial consequences of actions, induced by incomplete information about the costs of providing quality, affect relational contracts in buyer-seller relation- ships. Under incomplete information, payoffs to actions become private infor- mation. This can impede the joint understanding of what constitutes cooperative behavior, and may thus inject mistrust into relationships, even if credibility is held constant. Comparing seller-buyer relationships with and without complete infor- mation about seller costs in the laboratory, we find that such a lack of clarity has effects on the terms of relational contracts. However, these effects only concern the distribution of rents, and not efficiency.
    Keywords: Relational contracts, incomplete information, experiments
    JEL: D01 D03 L14 L20
    Date: 2016–08
  5. By: Corrado Giulietti; Enrico Rettore; Sara Tonini
    Abstract: Understanding the formation of trust at the individual level is a key issue given the impact that it has been recognized to have on economic development. Theoretical work highlights the role of the transmission of values such as trust from parents to their children. Attempts to empirically measure the strength of this transmission relied so far on the cross-sectional regression of the trust of children on the contemporaneous trust of their parents. We introduce a new identification strategy which hinges on a panel of parents and their children drawn from the German Socio-Economic Panel. Our results show that: 1) a half to two thirds of the observed variability of trust is pure noise irrelevant to the ransmission process; 2)this noise strongly biases the parameter estimates of the OLS regression of children's trust on parents' trust; however an instrumental variable procedure straightforwardly emerges from the analysis; 3) the dynamics of the component of trust relevant to the transmission process shed light on the structural interpretation of the parameters of this regression; 4) the strength of the flow of trust that parents pass to their children as well as of the sibling correlations due to other factors are easily summarized by the conventional R2 of a latent equation. In our sample, approximately one fourth of the variability of children's trust is inherited from their parents while two thirds are attributable to the residual sibling correlation.
    Keywords: Trust, intergenerational transmission, siblings correlations, cultural transmission
    JEL: J62 P16 Z1
    Date: 2016
  6. By: Frye, Timothy; Borisova, Ekaterina
    Abstract: How do flawed elections and post-election protest shape political attitudes? Taking advantage of the largely exogenous variation in the timing of a survey conducted in Moscow, we examine the short-term impact of the parliamentary election of December 4th, and the large protest of December 10th on trust in the Russian government. The fraud-marred parliamentary election had little effect on attitudes toward government, perhaps because allegations of vote improprieties were not new information. In contrast, the large protest of December 10th increased trust in government. Heightened trust arises largely from non-supporters of the ruling party updating their beliefs rather than from social desirability bias, a perceived improvement in government performance, or a “halo” effect. This finding is consistent with the view that autocrats can increase trust in government by unexpectedly allowing protest without repression. It also suggests that when evaluating trust in government citizens may cue not off the content of the protest, but off the holding of the protest itself.
    Keywords: trust in government, protest, elections, partisanship
    JEL: P26 D72
    Date: 2016–08–18
  7. By: Chen, Yefeng (Zhejiang University); Jiang, Shuguang (Zhejiang University); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We investigate corruption as a social dilemma by means of a bribery game in which a risk of collective sanction of the public officials is introduced when the number of officials accepting a bribe from firms reaches a certain threshold. We show that, despite the social risk, the pursuit of individual interest prevails and leads to the elimination of honest officials over time. Reducing the size of the groups while increasing the probability of collective sanction diminishes the officials' corruptibility but is not sufficient to eliminate the Tragedy of corruption that leads both firms and officials to earn less than in the absence of corruption.
    Keywords: corruption, social dilemma, collective risk, sanction, experiment
    JEL: C92 D73 H41
    Date: 2016–08
  8. By: Kirk Hamilton; John F. Helliwell; Michael Woolcock
    Abstract: We combine theory with data from different domains to provide an empirical analysis of the scale and variability of social capital as wealth. This is used to argue, given what we have learned in the literature on social capital, that the welfare returns to investing in trust could be substantial. Using social trust data from 132 nations covered by the Gallup World Poll, we present a range of estimates of social trust’s wealth-equivalent values. The estimates of the wealth embodied in social capital are very large, and with a structure and distribution quite different from those for physical capital. These estimates reflect values above and beyond what social trust contributes to supporting incomes and health. Although social trust is an important component of total wealth in all regions and country groupings, there are nonetheless big variations within and among regions, ranging from as low as 12% of total wealth in Latin America to 28% in the OECD.
    JEL: E21 E22 I31
    Date: 2016–08
  9. By: Asadullah, Niaz (University of Malaya)
    Abstract: This study presents new evidence on individual and community-specific determinants of social trust using data from 96 villages in Bangladesh. We find perceived institutional trust to be positively correlated with stated inter-personal trust. At the same time, there is significant social distance among various faith groups in our data: both Hindus and Muslims trust their coreligionists more than they trust those from other religions. Hindus in districts bordering India trust non-Hindus significantly less, compared to those in interior regions, which suggests that the results do not simply capture the effect of minority/majority status. Trust towards non-Muslims is negatively correlated with Islamic school attendance among Muslim respondents, while religiosity tends not to play any role. Compared to religion, the effects of institutional trust and local economic development are modest. These findings are robust to control for a range of individual- and community-level correlates, and enumerator fixed-effects.
    Keywords: Bangladesh, Hindu, institutions, religion, trust
    JEL: O12 Z1
    Date: 2016–08
  10. By: Joanna Dzionek-Kozlowska (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz); Rafal Matera (Institute of Economics, Department of History of Economic Thought and Economic History, University of Lodz)
    Abstract: Acemoglu and Robinson’s theory presented in their famous Why Nations Fail, and other papers, should be placed among the institutional theories of economic development. Yet the problem is they strongly differentiate their concept from the so-called culture hypothesis, which they reject. This stance is difficult to accept, not only because of the significance of culture-related factors of economic development, but it is also difficult to reconcile with their own model. The aim of this paper is to demonstrate that such a strong rejection of the culture hypothesis is inconsistent with their own analysis, triggers some principal problems with understanding the basic notion of institution, and suggests Acemoglu and Robinson are only focused on considering formal institutions. The article concludes with the statement that, paradoxically, Acemoglu and Robinson’s unconvincing rejection of the culture hypothesis may be regarded as a justification of the importance of culture-related factors.
    Keywords: Institutional Economics, Daron Acemoglu, James Robinson, Institutions vs Culture Controversy, Economic Development
    JEL: B52 O10 Z10
    Date: 2016–08
  11. By: Fabien Eloire (Centre lillois d'études et de recherches sociologiques et économiques); Claire Lemercier (Centre de sociologie des organisations); Veronica Aoki Santarosa (University of Michigan)
    Abstract: Powers of attorney are often interpreted as evidence of trust among the parties involved, and as such, of the existence of personal links between principals and their proxies. We build a novel dataset of notarized powers of attorney capturing a wide variety of agency relationships in four large French commercial cities in the eighteenth and nineteenth centuries to test hypotheses on the relational basis of economic relationships. We find little support for the idea of an evolution from personal to anonymous relationships during our period. Rather, our results point to the complementarity of embeddedness and formality, and suggest an increase over time in the importance of relationships based on repeated interactions, and a broad homophily driving merchants to choose fellow merchants as proxies.
    Keywords: procuration; mandat; proxy form; power of attorney; confiance; trust; agency relations
    Date: 2016–08
  12. By: Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
    Abstract: This paper reports results from an on-line economics experiment with head of household participants that explores the connection between trust and investment behavior. We show that trust is correlated with both the degree to which an investor makes decisions independently and the willingness to invest in an ambiguous asset. Our experiment is the first to suggest a link between trust, ambiguity, and investor independence.
    Keywords: trust, ambiguity, investment decisions, portfolio theory, artefactual field experiment,
    JEL: C91 C93 G02 G11
    Date: 2016–08–24
  13. By: Müller, Stephan; von Wangenheim, Georg
    Abstract: We study the coevolution of cooperation, preferences and cooperative signals in an environment where individuals engage in a signaling-extended prisoner's dilemma. We identify a new type of evolutionary equilibrium - a transitional equilibrium - which is constituted and stabilized by the dynamic interaction of multiple Bayesian equilibria. A transitional equilibrium: (1) exists under mild conditions, and (2) can stabilize a population that is characterized by the heterogeneity of behavior, preferences, and signaling. We thereby offer an explanation for persistent regularities observed in laboratory and field data on cooperative behavior. Furthermore, this type of equilibria is least demanding with respect to differences in signaling costs between 'conditional cooperators' and 'opportunists.' Indeed, and quite surprisingly, a transitional equilibrium is consistent with 'conditional cooperators' bearing higher signaling cost in terms of fitness than 'opportunists.'
    Keywords: evolutionary game theory,cooperation,signaling
    JEL: C73 D64 D82
    Date: 2016
  14. By: Welteke, Clara (DIW Berlin); Wrohlich, Katharina (DIW Berlin)
    Abstract: This paper analyzes to what extent parental leave decisions of mothers with young children depend on the decisions made by their coworkers. The identification of peer effects, which are defined as indirect effects of the behavior of a social reference group on individual outcomes, bears various challenges due to correlated characteristics within social groups and endogenous group membership. We overcome these challenges by exploiting quasi-random variation in the costs of parental leave during a narrow window around a cutoff date, induced by a parental leave benefit reform in Germany. The reform encourages mothers to remain at home during the first year following childbirth. Administrative linked employer-employee panel data enable us to assign a peer group to all individuals who work in the same establishment and occupational group. While there is a growing literature on peer effects, few studies look at peer effects in the context of parental leave decisions. We argue, however, that mothers with young children are particularly susceptible to peer behavior at the workplace due to preferences for conformity with peer group behavior as well as the career-related uncertainty that mothers face. Our results suggest that maternal decisions regarding the length of parental leave are significantly influenced by coworker decisions, in particular in situations with high uncertainty.
    Keywords: peer effects, social interaction, labor supply, family policy
    JEL: C31 J22 D04
    Date: 2016–08
  15. By: Tom Coupe (Kyiv School of Economics)
    Abstract: We use quasi-experimental evidence to measure the impact of the November 13, 2015 attacks in Paris, France on various channels through which terrorism can affect the economy. The evidence suggest the attacks reduced optimism and increased trust in the national government but did not affect current life satisfaction nor political orientation.
    Keywords: terrorism, trust, happiness, expectations
    JEL: I31 F52 Z13
    Date: 2016–08
  16. By: Marco Cucculelli (Università Politecnica delle Marche); Valentina Peruzzi (Università Politecnica delle Marche); Alberto Zazzaro (Università di Napoli Federico II)
    Abstract: In this paper we empirically investigate the effects of active family involvement in the company’s management on bank-firm lending relationships and access to credit. Based on the trade-off between relational and management human capital, we explore whether the relational capital embodied in the family leadership of the company influences the lending relationships with the main bank in terms of information sensitivity and duration. Then, we test whether family firms with family CEOs are more likely to experience a credit restriction from banks than family firms appointing professional CEOs external to the family. Results indicate that family businesses appointing family managers are significantly more likely to maintain soft-information-based and longer-lasting lending relationships. However, having family executives does not have a negative impact on firm’s access to credit, while the creation of soft-information-based and long-lasting lending relationships significantly reduces the likelihood of experiencing credit restrictions. In view of these findings, family relational capital seems to have a univocal beneficial impact on bank-firm relationship in our sample.
    Keywords: Family firm, family CEO, soft-information, relational capital, relationship lending, credit rationing.
    JEL: D22 G21 G22
    Date: 2016–08

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