On representative social capital

This paper analyzes the behavior of subjects randomly drawn from the Dutch population who reveal their capacity to provide and sustain social capital by their propensity to invest and reward investments in an economic experiment. We find that heterogeneity in behavior is characterized by several asymmetries—men, the young and elderly, and low educated individuals invest relatively less, but reward significantly more investments. The age effects are found to corroborate existing findings, whereas those of gender and education do not. Higher expected levels of investments by others are found to have a positive and significant effect on own investments. Finally, a laboratory experiment with student subjects is found to provide a lower bound of the population level of social capital.     

Languages in the European Union: The quest for equality and its cost

The European Union has recently expanded from 15 to 25 countries, bringing the number of official languages to 20. Currently, the EU extends equal treatment to all member countries’ official languages. This, however, is costly, especially since many Europeans speak one of the procedural languages, English, French or German, either as a native or a foreign language. We develop a simple theoretical model of linguistic-regime choice in a multilingual society and apply the model's insights to the case of the EU: we compute disenfranchisement rates that would result from using only the three procedural languages for all EU business and then proceed to quantify the average cost per person and cost per disenfranchised person associated with providing translations and interpreting into the remaining languages. Both the disenfranchisement rates and costs are shown to vary substantially across the different languages, raising important questions about the economic efficiency of equal treatment for all languages. We argue that an efficient solution would be to decentralize the provision of translations.     

Neckties in the tropics: a model of international trade and cultural diversity

Abstract .  Some cultural goods are consumed socially and are characterized by the same consumption network externalities as languages. Also, producers of new cultural goods in any one country draw on the stock of ideas generated by previous cultural production in all countries. For such goods, costless trade and communication tend to lead to the dominance of one cultural style, increasing utility in the short run but reducing quality and welfare in the long run. Increasing protection while keeping communication costs low may stimulate production of cultural goods that are 'compatible' with the dominant style, adding little to the stock of usable ideas.     

Does trust promote growth?

We examine the effect of generalized trust on long-term economic growth. Unlike in previous studies, we use Bayesian model averaging to deal rigorously with model uncertainty and attendant omitted variable bias. In addition, we address endogeneity and assess whether the effect of trust on growth is causal. Examining more than forty regressors for nearly fifty countries, we show that trust exerts a positive effect on long-term growth and, based on the posterior inclusion probabilities, suggest that trust is an important driver of long-term growth. Our results also show that trust is key for growth in countries with a weak rule of law.     

Informal insurance in social networks

This paper studies bilateral insurance schemes across networks of individuals. While transfers are based on social norms, individuals must have the incentive to comply. We investigate the structure of self-enforcing insurance networks. Network links play two distinct and possibly conflictual roles. They act as conduits for both transfers and information; affecting the scope for insurance and the severity of punishments upon noncompliance. Their interaction leads to a characterization of stable networks as suitably “sparse” networks. Thickly and thinly connected networks tend to be stable, whereas intermediate degrees of connectedness jeopardize stability. Finally, we discuss the effect of discounting on stability.     

Matching in community-based organizations

Using a rich dataset from West Africa, we examine the household characteristics associated with membership in community-based organizations (CBOs). We find that on average it is the more fortunate members of rural society who belong in CBOs. In Senegal, the dominant criterion is land ownership. In Burkina Faso it is age and family ties with village authorities. Ethnicity plays a role as well: CBO membership is less likely for ethnic groups that traditionally emphasize livestock raising. Next we look for evidence of assortative matching along multiple dimensions, using an original methodology based on dyadic regressions. We find robust evidence of positive assorting by physical and ethnic proximity as well as by wealth and household size. Along certain dimensions, donor-sponsored CBOs are less elitist and more inclusive. But the reverse is true for other dimensions, particularly in Burkina Faso.     

Community and class antagonism

We investigate how vertical unity within a community interacts with horizontal class divisions of an unequal income distribution. Community is conceptualized in terms of a public good to which all those in the community have equal access, but from which outsiders are excluded. We formulate the idea of redistributive tension, or class antagonism, in terms of the costs that poorer individuals would be willing to impose on the rich, to achieve a given gain in personal income. Our conclusion is that the nominal distribution of income could give a misleading picture of tensions in society, both within and across communities. Ideologies of community solidarity may well trump those of class solidarity because of the implicit sharing of community resources brought about by community-specific public goods. Greater economic mobility of particular types may actually exacerbate class tensions instead of attenuating them. We illustrate our theoretical results with a discussion of a number of historical episodes of shifting class tensions and alliances.     

Reputation, group structure and social tensions

Social tensions impede social cohesion and public goods provision, and can be a driving force for more serious conflicts such as civil wars. Surprisingly, the emergence of social tensions has been studied only rarely in the literature. In the present contribution a game-theoretic model highlights how reputation concerns and the structure of group cleavages matter for the emergence of social tensions. In particular, the respective effects of ethnic fractionalization, polarization and segregation are analyzed. The differences between ethnicity and class, and the role of social mobility are also studied. The predictions of the model can account for recent empirical evidence.     

Does female schooling reduce fertility? Evidence from Nigeria

The literature generally points to a negative relationship between female education and fertility. Citing this pattern, policymakers have advocated educating girls and young women as a means to reduce population growth and foster sustained economic and social welfare in developing countries. This paper tests whether the relationship between fertility and education is indeed causal by investigating the introduction of universal primary education in Nigeria. Exploiting differences in program exposure by region and age, the paper presents reduced form and instrumental variables estimates of the impact of female education on fertility. The analysis suggests that increasing female education by one year reduces early fertility by 0.26 births.     

A note on representativeness and household finance

Previous research has shown that social households have a higher probability of owning risky assets. Using a representative sample of the German population, we demonstrate that the sociability effect is much stronger among people younger than 50.     

The autocratic roots of social distrust

This paper presents evidence that autocratic culture adversely affects social trust and political participation. We find that individuals whose ancestors migrated from countries with higher autocracy levels are less likely to trust others and to vote in presidential elections in the U.S. The impact of autocratic culture on trust can last for at least three generations while the impact on voting disappears after one generation. These impacts on trust and voting are also significant across Europe. We further access the robustness of our findings concerning selection into migration and other confounders such as home countries’ economic conditions, human capital stocks, and the strength of family ties.     

Trust, Inequality and Ethnic Heterogeneity

Using a large Australian social survey, combined with precise data on neighbourhood characteristics, I explore the factors that affect trust at a local level ('localised trust') and at a national level ('generalised trust'). Trust is positively associated with the respondent's education, and negatively associated with the amount of time spent commuting. At a neighbourhood level, trust is higher in affluent areas, and lower in ethnically and linguistically heterogeneous communities, with the effect being stronger for linguistic heterogeneity than ethnic heterogeneity. Linguistic heterogeneity reduces localised trust for both natives and immigrants, and reduces generalised trust only for immigrants. Instrumental variables specifications show similar results. In contrast to the USA, there is no apparent relationship between trust and inequality across neighbourhoods in Australia.     

Collective management of residential housing in Russia: The importance of being social

Homeowners associations (HOAs) implement collective management in residential housing. We assess the performance of such associations in Russia by using the stochastic frontier technique. Cultural traits enabling tenants to make proper use of the HOA decision-making procedures are essential for resolving the collective action problem and ensure accountability of governing bodies and outside contractors. Such “technical civic competence” has a stronger impact on HOA performance than more conventional forms of social capital which rise in their significance when HOA governance breaks down and informal grassroots alternatives are mobilized instead. Massive and indiscriminate “supply-led” introduction of collective management in residential housing without matching cultural and institutional prerequisites could be counterproductive. Flexibility, freedom of choice, and market development are required to avert the failures of HOAs commonly observed in Russia.     

Social capital and political institutions: Evidence that democracy fosters trust

This paper finds evidence that more democratic political institutions increase trust. Second generation immigrants with ancestries from 115 countries are studied within 30 European countries. Comparing individuals born and residing in the same country, those whose father was born in a more democratic country express higher trust than those whose father was born in a less democratic country. The results are robust to individual, parental, and ancestral country controls.     

Evolutionary stability of social norms in a socioeconomic equilibrium model

A hybrid of a model of economic equilibrium in two markets and a social game is formed. The link between the two is established through a social norm that conditions correct social behavior on economic variables and therefore distorts the economic equilibrium allocation. The initial endowment of an individual determines whether she gains from a social norm. The evolution of norms is examined in a dynamic model where norms are more likely to persist if they deliver higher utility to their believers. Also it is assumed that norms lose importance when they are disobeyed by their believers. Optimally coordinating norms are not necessarily evolutionarily stable, and a suboptimal norm can be the outcome of the evolutionary process.     

Longitudinal evidence on financial expectations in Albania

This article focuses on the effect of remittances on financial expectations in Albania using longitudinal data covering the period 2002–2004. To study the dynamics of income satisfaction at the household level, we use subjective data on past, current and future financial situations and estimate random and fixed effect ordered Probit models. We find that households are more optimistic about the future when they have experienced an improvement in their financial situation in the past and when they have received private transfers from foreign countries.     

A different look at Lenin’s legacy: Social capital and risk taking in the Two Germanies

What are the long-term effects of Communism on economically relevant notions such as social trust, fairness, and scope of cooperation? To answer this question, we study the post-unification trajectory of convergence between East and West German individuals with regard to trust, cooperation, and risk. Our hypotheses are derived from a model of German unification that incorporates individual responses both to incentives and to values inherited from earlier generations as recently suggested in the literature. Using two waves of balanced panel data, we find that despite twenty years of unification East Germans are still characterized by a persistent level of social distrust. In comparison to West Germans, they are less inclined to see others as cooperative. East Germans are also found to have been more risk loving than West Germans. However, risk attitudes fully converged recently.     

Building rational cooperation

Experiments have shown that people have a natural taste for cooperation. This paper takes a first step in understanding how formal and informal institutions might be designed to utilize these private tastes to facilitate more efficient economic interactions. We examine a twice-played prisoners’ dilemma in which the total of the stakes in the two periods is fixed, but the distribution of these stakes can be varied across periods. We verify experimentally that it is best to “start small,” reserving most of the stakes for the second period.     

New facts on infidelity

We establish new empirical facts, in line with the recent theoretical literature on infidelity. Infidelity displays seasonality and state dependence. In the US socioeconomic status is not a driver of infidelity and females and males are equally likely to be unfaithful.