Abstract
Lack of well-functioning formal institutions leads to reliance on social networks to enforce informal contracts. Social proximity and network centrality may affect cooperation. To assess the extent to which networks substitute for enforcement, we conducted high- stakes games across 34 Indian villages. We randomized subjects' partners and whether contracts were enforced to estimate how partners' relative network position differentially matters across contracting environments. While socially close pairs cooperate even without enforcement, distant pairs do not. Individuals with more central partners behave more cooperatively without enforcement. Capacity for cooperation in the absence of contract enforcement therefore depends on the subjects' network position.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 43-78 |
| Number of pages | 36 |
| Journal | American Economic Journal: Applied Economics |
| Volume | 10 |
| Issue number | 4 |
| DOIs | |
| State | Published - Oct 1 2018 |
Funding
* Chandrasekhar: Department of Economics, 234 Landau Economics, Stanford University, 579 Serra Mall, Stanford, CA, 94305 (email: [email protected]); Kinnan: Department of Economics, Tufts University, 8 Upper Campus Road, Medford, MA 02155 (email: [email protected]); Larreguy: Department of Government, Harvard University, CGIS Knafel Building, 1737 Cambridge St., Room 408, Cambridge, MA 02138 (email: [email protected]). We gratefully acknowledge financial support from National Science Foundation (NSF) grant SES-0752735. We thank Abhijit Banerjee, Esther Duflo, Matthew Jackson, Daron Acemoglu, Lori Beaman, Sam Bowles, Emily Breza, Dave Donaldson, Pascaline Dupas, Simon Gaechter, Ben Golub, Avner Greif, S. Holger Herz, Seema Jayachandran, Markus Mobius, Gowri Nagaraj, Ben Olken, Adam Sacarny, Laura Schechter, Tavneet Suri, Robert Townsend, Tom Wilkening, Jan Zilinsky, as well as participants at various seminars. Chandrasekhar thanks the NSF GRFP; Kinnan, the US Deptartment of Education; and Larreguy, the Bank of Spain and Caja Madrid Foundation. CMF at the IFMR provided valuable assistance. JPAL, CIS, MISTI-India, and MIT\u2019s Shultz Fund provided financial support for this project. A previous version of this paper was titled \u201CCan networks substitute for contracts? Evidence from a lab experiment in the field.\u201D The network data used in this paper are archived at the J-PAL Dataverse at Harvard IQSS: http://hdl.handle.net/1902.1/16559. We gratefully acknowledge financial support from National Science Foundation (NSF) grant SES-0752735. We thank Abhijit Banerjee, Esther Duflo, Matthew Jackson, Daron Acemoglu, Lori Beaman, Sam Bowles, Emily Breza, Dave Donaldson, Pascaline Dupas, Simon Gaechter, Ben Golub, Avner Greif, S. Holger Herz, Seema Jayachandran, Markus Mobius, Gowri Nagaraj, Ben Olken, Adam Sacarny, Laura Schechter, Tavneet Suri, Robert Townsend, Tom Wilkening, Jan Zilinsky, as well as participants at various seminars. Chandrasekhar thanks the NSF GRFP; Kinnan, the US Deptartment of Education; and Larreguy, the Bank of Spain and Caja Madrid Foundation. CMF at the IFMR provided valuable assistance. JPAL, CIS, MISTI-India, and MIT's Shultz Fund provided financial support for this project. A previous version of this paper was titled \"Can networks substitute for contracts? Evidence from a lab experiment in the field.\" The network data used in this paper are archived at the J-PAL Dataverse at Harvard IQSS: http://hdl.handle.net/1902.1/16559
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)