ERIK O. KIMBROUGH, Simon Fraser University
Email: ekimbrough@gmail.com
JARED RUBIN, Chapman University - The George L. Argyros School of Business & Economics
Email: jrubin@chapman.edu

When individuals trade with strangers, there is a temptation to renege on contracts. In the absence of repeated interaction or exogenous enforcement mechanisms, this problem can impede valuable exchange. Historically, individuals have solved this problem by forming institutions that sustain trade using group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are generally unavailable to isolated individuals: information sharing and in-group punishment. In this paper, we design a laboratory experiment to distinguish the roles of these two mechanisms in sustaining group reputation and increasing gains from trade. We find that information sharing encourages path dependence via group reputation; good (bad) behavior by individuals results in greater (fewer) gains from exchange for the group in the future. However, the mere threat of in-group punishment is enough to discourage bad behavior, even if punishment is rarely employed. When combined, information sharing and in-group punishment work as complements; the presence of in-group punishment encourages cooperation early on, and information sharing reinforces this behavior over time.

VALENTINA P. DIMITROVA-GRAJZL, Virginia Military Institute
Email: dimitrova-grajzlvp@vmi.edu
PETER GRAJZL, Washington and Lee University - Department of Economics
Email: grajzlp@wlu.edu
KATARINA ZAJC, University of Ljubljana - Faculty of Law
Email: katarina.zajc@pf.uni-lj.si

While it is well known that the majority of civil cases filed in U.S. courts are not resolved through trial, little is known empirically about the modes of civil case disposition worldwide. To fill this void in the literature, we analyze civil case disposition in post-socialist Slovenia. We first characterize the empirical patterns of modes of civil case disposition in Slovenian local courts. We then examine court-level determinants of the incidence of in-court settlements versus trial-based judgments. Consistent with the theory that both judges and disputing parties take into account their respective private benefits and costs when choosing their preferred mode of case disposition, we find evidence that the incidence of in-court settlements versus trial-based judgments increases with the number of all case filings per judge. Thus, court resources and demand for court services influence not only total court output, as previously established in the literature, but also how cases are disposed of.

GARRY GRAY, Harvard University - Edmond J. Safra Center for Ethics
Email: ggray@ethics.harvard.edu

Institutional corruption involves influences that implicitly or purposively serve to distort the independence of a professional in a position of trust. The concept brings into focus the everyday norms, practices and scripts of professional life that can systematically influence unethical behaviours. To make visible these often implicit influences, insider accounts are particularly valuable. This is demonstrated through an analysis of insider accounts by Jack Abramoff, the American lobbyist who was criminally charged in 2006. From these accounts, I develop a typology of techniques that perpetuate the social organization of institutional corruption in lobbying and Congress. More broadly, the institutional corruption concept provides an empirical pathway that can rejuvenate inquiries into the world of professional misconduct and unethical behaviour.

VINCENZO ATELLA, University of Rome II - Centre for International Studies on Economic Growth (CEIS), Department of Economics and Finance, University of Rome II - Faculty of Economics
Email: atella@uniroma2.it
FEDERICO BELOTTI, University of Rome II - Faculty of Economics
Email: federico.belotti@uniroma2.it
DOMENICO DEPALO, Bank of Italy
Email: domenico.depalo@bancaditalia.it
ANDREA PIANO MORTARI, CEIS Tor Vergata
Email: piano.mortari@economia.uniroma2.it

Over the last decades spatial econometrics models have represented a common tool for measuring spillover effects across different geographical entities (counties, provinces, regions or nations). Unfortunately, no one has considered that when these entities share common borders but obey to different institutional settings, ignoring this feature may induce misleading conclusions. In fact, under these circumstances, and if institutions do play a role, we expect to find spatial effects mainly "within" entities belonging to the same institutional setting, while the "between" effect across different institutional settings should be attenuated or totally absent, even if the entities share a common border. In this case, relying only on geographical proximity will then produce biased estimates, due to the composition of two distinct effects. To avoid these problems, we derive a methodology that partitions the standard contiguity matrix into within and between contiguity matrices, allowing to separately estimate these spatial correlation coefficients and to easily test for the existence of institutional constraints. In our empirical analysis we apply this methodology to Italian Local Health Authority expenditures, using spatial panel techniques. Results show a strong and significant spatial coefficient only for the within effect, thus confirming the importance and validity of our approach.

SILVIA DEL PRETE, Bank of Italy
Email: silvia.delprete@bancaditalia.it
MARCELLO PAGNINI, Bank of Italy
Email: marcello.pagnini@bancaditalia.it
PAOLA ROSSI, Bank of Italy
Email: paola.rossi@bancaditalia.it
VALERIO PAOLO VACCA, Bank of Italy
Email: valeriopaolo.vacca@bancaditalia.it

Il lavoro analizza l’organizzazione dell’attività di prestito delle banche utilizzando i risultati di due indagini riferite al 2006 e al 2009. In questo periodo l’utilizzo di metodologie di rating e scoring è andato diffondendosi anche alle banche più piccole; gli intermediari maggiori hanno impiegato tali tecniche in modo più incisivo nel pricing dei prestiti, mentre si è ridotta la rilevanza dei rating nella decisione se concedere il finanziamento; le banche più piccole hanno continuato a utilizzarli in modo flessibile. In seguito alla crisi le banche hanno attribuito maggiore importanza a tutte le fonti informative, qualitative o quantitative, accrescendo la richiesta di garanzie. La tendenza al decentramento delle decisioni sembra essersi interrotta e la permanenza media dei responsabili di filiale è diminuita. Questi ultimi hanno deleghe spesso correlate ai rating, mentre gli incentivi nella loro remunerazione non hanno subito modifiche sostanziali. In sintesi, la recessione del 2008-09 in taluni casi ha contribuito ad accelerare processi di riorganizzazione già in corso, in altri invece ne ha mutato la direzione.

This paper analyses how banks organize their lending activity by using the results of two surveys carried out in 2006 and in 2009. During this period, the use of rating and scoring methodologies became more widespread even among the smaller banks. Larger banks used these techniques more frequently when pricing their loans, while the importance of ratings in deciding whether to grant a loan in the first place declined. Smaller banks continued to use ratings in a flexible way. In the wake of the crisis banks gave more importance to both hard and soft types of information and increased their guarantee requirements. The trend towards decentralizing decision-making seems to have halted and the average tenure of branch managers has shortened. These managers have mandates that are frequently correlated with the ratings, while pay incentives have not changed substantially. In brief, the 2008-09 recession in some cases contributed to the acceleration of reorganization processes already under way, in others however it altered their direction.