2010/11/23 by Chris Bidner, Patrick Francois, Patrick François · 2 citations
Social Sciences · Economics, Econometrics and Finance · #Culture, Economy, and Development Studies #Economic Policies and Impacts #Experimental Behavioral Economics Studies
paper · doi:10.1111/j.1468-0297.2010.02398.x
We study the co‐evolution of honesty norms and institutions. New trading opportunities require institutional changes to be realised, since the initial vulnerability of institutions to opportunistic behaviour leads to the deterioration of norms. We show how an escape from opportunism requires that institutional improvements outpace norm deterioration. A key prediction emerges: larger economies are more likely to evolve to steady states with strong honesty norms but need not have better institutions. This prediction is tested using a cross‐section of countries; population has a significant positive relationship with trust, even when controlling for standard trust determinants and institutional quality.