Economics of Culture and Institutions

November 12, 2011
Paola Giuliano, University of California at Los Angeles, and Alberto Bisin, New York University, Organizers

Avner Greif, Stanford University, and Guido Tabellini, IGIER
The Clan and the City: Sustaining Cooperation in China and Europe

Over the last millennium, the clan and the city have been the locus of cooperation in China and Europe respectively. Greif and Tabellini examine - analytically, historically, and empirically - the cultural, social, and institutional co-evolution that led to this bifurcation. They highlight that social organizations, the groups to whom members feel a moral obligation, are the basic units of cooperation. Social organizations affect institutional development because intra-group moral commitment reduces enforcement costs and because social organizations have a comparative advantage in pursuing collective actions. They perpetuate because of positive feedbacks between morality, institutions, and the implied pattern of cooperation.

Kaivan Munshi and Kenneth Chay, Brown University and NBER
Black Mobilization after Emancipation: Evidence from Reconstruction and the Great Migration

Munshi and Chay demonstrate that African-Americans in the South responded collectively to the political and economic opportunities that arose after the Civil War, but only in areas where the organization of production permitted strong social ties to emerge. Specifically, the authors examine political participation during and just after Reconstruction (1870-90) and the movement to northern cities during the Great Migration (1916-30). In contrast to most empirical work on social networks and social capital, this paper analyzes the process of group formation from its inception (Emancipation) and it uses a plausibly exogenous source of variation in social cohesion among potential members -- measured by the share of land allocated to labor-intensive plantation crops, or the plantation share, in each southern county. The model here shows that cooperation cannot be supported at plantation shares (social cohesion) below a threshold, but that the size of the collaborating group is monotonically increasing in plantation share above that threshold. The patterns of political participation and migration across counties that are uncovered are consistent with the theory -- there is no association with plantation share up to a threshold at which a steep monotonic relationship begins. This finding is robust to rigorous testing, and these tests show that competing hypotheses do not exhibit similar nonlinear patterns. The results indicate that blacks from southern counties with high plantation shares accounted for a disproportionate share of the migrants to the North. These migrants (who would have moved as a group) were concentrated at a limited number of destinations, with potentially long-term implications for the evolution of African-American communities across northern cities.

Nico Voigtlaender, University of California at Los Angeles and NBER, and Hans-Joachim Voth, Universitat Pompeu Fabra

Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany (NBER Working Paper No. 17113)

How persistent are cultural traits? Voigtlaender and Voth use data on anti-Semitism in Germany and find continuity at the local level over more than half a millennium. When the Black Death hit Europe in 1348-50, killing between one third and one half of the population, its cause was unknown. Many contemporaries blamed the Jews. Cities all over Germany witnessed mass killings of their Jewish population. At the same time, numerous Jewish communities were spared. The authors use plague pogroms as an indicator for medieval anti-Semitism. Pogroms during the Black Death are a strong and robust predictor of violence against Jews in the 1920s, and of votes for the Nazi Party. In addition, cities that saw medieval anti-Semitic violence also had higher deportation rates for Jews after 1933, were more likely to see synagogues damaged or destroyed in the 'Night of Broken' Glass in 1938, and their inhabitants wrote more anti-Jewish letters to the editor of the Nazi newspaper Der Sturmer.

Matthias Doepke, Northwestern University, and Fabrizio Zilibotti, University of Zurich

The Intergeneration Transmission of Risk Preferences, Entrepreneurship and Growth

Doepke and Zilibotti develop a theory of the intergenerational transmission of risk preferences. Parents can instill either risk tolerance or risk aversion in their children, and they face both altruistic and paternalistic motives in this process. Risk-tolerant children are more likely to benefit from profitable but risky opportunities, such as the career choice of being an entrepreneur. However, risk-tolerant children may also engage in other risky choices (such as smoking or riding motorcycles) that the parents disagree with. In this model, the transmission of risk preferences feeds back into the growth rate of the economy, because risk-taking entrepreneurs are essential for endogenous technological innovation. The theory has implications for how the extent and nature of risk in the economic environment affects the transmission of risk preferences, entrepreneurship, and growth.

Daron Acemoglu, MIT and NBER, and Matthew Jackson, Stanford University

History and Expectations in the Evolution of Social Norms (NBER Working Paper No. 17066)

Acemoglu and Jackson study the evolution of the social norm of "cooperation" in a dynamic environment. Each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game. Social norms emerge as patterns of behavior that are stable in part because of agents' interpretations of private information about the past, which are influenced by occasional past behaviors that are commonly observed. The authors first characterize the (extreme) cases under which history completely drives equilibrium play, leading to a social norm of high or low cooperation. In intermediate cases, the impact of history is potentially countered by occasional "prominent" agents, whose actions are visible by all future agents, and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation. The researchers also show that in equilibria not completely driven by history, there is a pattern of "reversion" whereby play starting with high (low) cooperation reverts toward lower (higher) cooperation.

Ingela Alger, Toulouse School of Economics, and Jorgen Weibull, Stockholm School of Economics

Evolutionary Stability of Social Preferences

Behavioral and experimental economists have proposed different classes of social or "other-regarding" preferences - such as altruism, inequity aversion, fairness and conditional altruism - in order to explain pro-social behavior observed in the laboratory and the field. However, while social preferences may serve as a commitment device under complete information, they may be costly under incomplete information. Alger and Weibull ask what preferences one can expect to prevail, from first principles, when individuals are randomly matched to play a symmetric game in material payoffs, the matched individuals are rational but do not know each other's preferences, and matchings may be assortative. They show that a convex combination of selfishness and Kantian social preferences stand out as evolutionary-stable in a wide variety of situations. They call such individuals homo hamiltoniensis (after the biologist Bill Hamilton). A special case is the familiar homo economicus, who appears only under uniform random matching, which arguably is rare in reality.

Adeline Delavande, Universidade Nova de Lisboa, and Basit Zafar, Federal Reserve Bank of New York
Stereotypes and Madrassas: Experimental Evidence from Pakistan

Little is known about the behavior of Madrassa (Islamic religious seminaries) students, and how other groups in their communities interact with them. To investigate this, Delavande and Zafar use experimental data that they collected in Madrassas and other educational institutions of distinct religious tendencies and socioeconomic background in Pakistan. First, they find a high level of trust among all groups, with Madrassa students being the most trusting. Second, within each group, they fail to find evidence of in-group bias or systematic out-group bias either in trust or tastes. Third, they find that students from certain backgrounds underestimate the trustworthiness of Madrassa students.

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