Democratic Institutions, Reciprocity, and Pro-Social Behavior

Abstract

Recent experimental research suggests that people behave more cooperatively when the rules governing a strategic interaction (e.g. a public goods game) are modified democratically than when they are modified exogenously. In a related experiment, I show that people are less likely to unilaterally destroy surplus for personal gain when a provisional allocation is chosen democratically than when an identical provisional allocation is imposed exogenously. I also develop a theory of reciprocity that can rationalize the main findings of the endogenous institutions literature, including the ones from this experiment.

Keywords: democratic institutions, reciprocity, democracy premium

JEL Classification: C92, D71, D90