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From Culture to Governance: Towards a Comparative Economics of Institutions and Organizations

Paper Session

Saturday, Jan. 4, 2020 10:15 AM - 12:15 PM (PST)

Manchester Grand Hyatt, Harbor D
Hosted By: Association for Comparative Economic Studies & Society for Institutional and Organizational Economics
  • Chair: Robert Gibbons, Massachusetts Institute of Technology

Culture Clash: Incompatible Reputation Systems and Intergroup Conflict

Vasiliki Fouka
,
Stanford University
Alain Schlaepfer
,
Santa Clara University

Abstract

Under which conditions does intergroup contact lead to conflict? We provide a novel answer to this question by highlighting the role of reputation mechanisms in sustaining cooperation. Punishment-based reputation (a “culture of honor”) and reputation based on image scoring (indirect reciprocity) can both deter defection in one-time interactions within groups. Yet these reputation mechanisms can be incompatible in intergroup interactions. Using a game theoretic model, we show that injecting pools of individuals from a punishment-based culture into a culture of image scoring can lead to widespread intergroup conflict. Cooperation is a more likely outcome if the cultures that interact use a similar reputation mechanism. The theoretical framework helps us explain a variety of phenomena, such as variation in immigrant crime rates and patterns of outgroup discrimination.

The Interdependence of Rules and Civic Values in Commons Management

Devesh Rustagi
,
Goethe University Frankfurt

Abstract

This paper examines how the interaction between rules restricting resource use and civic values promoting cooperation affect the successful provisions of commons. The study takes place in the context of a forest commons management program, which was launched to mitigate high deforestation induced by unregulated livestock grazing, resulting in the absence of young trees. I find that groups perform best in managing their commons when they have both stronger propensity for cooperation and formal rules regulating livestock grazing, but not when either of these two factors is present in isolation. Several falsification tests confirm these results: (i) the effect holds only for young trees affected by livestock grazing, but not for mature trees that are unaffected, and these patterns are persistent over time; (ii) among the young trees, the effect is observed only for broadleaf trees that are prone to livestock damage, but not for coniferous trees that are unpalatable to livestock; (iii) the effects are strongest for broadleaf species that are most palatable to livestock. The effects arise because in groups with rules, cooperators spend much more time monitoring their forest, resulting in optimistic beliefs about the cooperation of others and eventually higher contribution. In return, the successful enforcement of rules hinges upon costly enforcement by cooperators. These findings highlight the interdependence of rules and civic values in the management of commons.

The Limits of Meritocracy: Screening Bureaucrats Under Imperfect Verifiability

Xiao Yu Wang
,
Duke University
Juan Carlos Suárez Serrato
,
Duke University
Shuang Zhang
,
University of Colorado Boulder

Abstract

Does bureaucratic ability predict promotion in governments? We show that self-reported performance in enforcing the One Child Policy predicts mayoral promotion in China. However, misreporting handicaps screening a non-manipulated performance measure does not predict promotion. We show that this is consistent with a model where a government has a meritocratic objective but underestimates the imperfect verifiability of performance, rather than a model where a government is only interested in the illusion of meritocracy. Thus, despite meritocratic intentions, we challenge the notion that a successful promotion system effectively substituted for democratic institutions in explaining Chinese growth.

How Research Affects Policy: Experimental Evidence from 2,150 Brazilian Municipalities

Diana Moreira
,
University of California-Davis
Jonas Hjort
,
Columbia University
Gautam Rao
,
Harvard University

Abstract

This paper investigates if research findings change political leaders’ beliefs and cause policy
change. Collaborating with the National Confederation of Municipalities in Brazil, we work
with 2,150 municipalities and the mayors who control their policies. We use experiments to
measure mayors’ demand for research information and their response to learning research findings.
In one experiment, we find that mayors and other municipal officials are willing to pay to
learn the results of impact evaluations, and update their beliefs when informed of the findings.
They value larger-sample studies more, while not distinguishing on average between studies
conducted in rich and poor countries. In a second experiment, we find that informing mayors
about research on a simple and effective policy (reminder letters for taxpayers) increases
the probability that their municipality implements the policy by 10 percentage points. In sum,
we provide direct evidence that providing research information to political leaders can lead to
policy change. Information frictions may thus help explain failures to adopt effective policies.
Discussant(s)
Karla Hoff
,
World Bank
Gerard Padró i Miquel
,
Yale University
Robert Gibbons
,
Massachusetts Institute of Technology
JEL Classifications
  • H1 - Structure and Scope of Government
  • D0 - General