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American Economic Review: Vol. 97 No. 5 (December 2007)

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Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay

Article Citation

Schechter, Laura. 2007. "Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay." American Economic Review, 97(5): 1560-1582.

DOI: 10.1257/aer.97.5.1560

Abstract

In developing countries lacking legal enforcement, villagers may use implicit contracts to minimize crime. I construct a dynamic limited-commitment model, in which a thief cannot commit to forego stealing, but is induced to steal less by the promise of future gifts. Combining survey data on production, theft, gifts, and trust with experiments measuring trustworthiness, I provide supporting evidence. Farmers living near more relatives or with plots that are difficult to steal from give fewer gifts and trust more, and those living near more relatives also experience less theft. Giving increases when trust is lower and the threat of theft is greater. (JEL D86, K42, O17, Z13)

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Authors

Schechter, Laura (University of Wisconsin at Madison)

JEL Classifications

D86: Economics of Contract: Theory
K42: Illegal Behavior and the Enforcement of Law
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Z13: Economic Sociology; Economic Anthropology


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