Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment

74 Pages Posted: 17 May 2013

See all articles by Alessandra Cassar

Alessandra Cassar

University of San Francisco - Department of Economics

Giovanna D'Adda

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Pauline A. Grosjean

UNSW Business School, School of Economics

Date Written: April 3, 2013

Abstract

We design an experiment to examine the causal effect of legal institutional quality on informal norms of cooperation, and study the interaction of institutions and culture in sustaining economic exchange. 346 subjects in Italy and Kosovo play a market game under different and randomly allocated institutional treatments, which generate different incentives to behave honestly, preceded and followed by a non-contractible and non-enforceable trust game. Significant increases in individual trust and trustworthiness follow exposure to ‘better’ institutions. A reduction by one percentage point in the probability of facing a dishonest partner in the market game, which is induced by the quality of legal institutions, increases trust by 7 to 11%, and trustworthiness by 13 to 19%. This suggests that moral norms of cooperative behavior can follow improvements in formal institutional quality. Cultural origin, initial trust and trustworthiness influence opportunistic behavior in markets, but only in the absence of strong formal institutions.

Keywords: legal institutions, culture, trust, trustworthiness, markets, experimental methods

JEL Classification: K40, O17, Z10

Suggested Citation

Cassar, Alessandra and D'Adda, Giovanna and Grosjean, Pauline A., Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment (April 3, 2013). UNSW Australian School of Business Research Paper No. 2013-10, Available at SSRN: https://ssrn.com/abstract=2263989 or http://dx.doi.org/10.2139/ssrn.2263989

Alessandra Cassar (Contact Author)

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

Giovanna D'Adda

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

Pauline A. Grosjean

UNSW Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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