TY - JOUR
T1 - Social networks as contract enforcement
T2 - Evidence from a lab experiment in the field
AU - Chandrasekhar, Arun G.
AU - Kinnan, Cynthia
AU - Larreguy, Horacio
N1 - Funding Information:
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
Funding Information:
* Chandrasekhar: Department of Economics, 234 Landau Economics, Stanford University, 579 Serra Mall, Stanford, CA, 94305 (email: arungc@stanford.edu); Kinnan: Department of Economics, Tufts University, 8 Upper Campus Road, Medford, MA 02155 (email: cynthia.kinnan@tufts.edu); Larreguy: Department of Government, Harvard University, CGIS Knafel Building, 1737 Cambridge St., Room 408, Cambridge, MA 02138 (email: hlar-reguy@fas.harvard.edu). 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.
Publisher Copyright:
© 2018 American Economic Association.
PY - 2018/10/1
Y1 - 2018/10/1
N2 - 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.
AB - 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.
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U2 - 10.1257/app.20150057
DO - 10.1257/app.20150057
M3 - Article
AN - SCOPUS:85057395387
SN - 1945-7782
VL - 10
SP - 43
EP - 78
JO - American Economic Journal: Applied Economics
JF - American Economic Journal: Applied Economics
IS - 4
ER -