Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126527
Authors: 
Panganiban, Marian
Year of Publication: 
2015
Series/Report no.: 
Jena Economic Research Papers 2015-015
Abstract: 
Although the role of formal and informal institutions in promoting economic growth and sustaining exchange relations is now well established, explaining and differentiating how informal and formal rules affect individual behavior remain a challenge. This study aims to distill the essential characteristics of formal and informal institutions and disentangle their effects on trust and performance in exchange relations through a laboratory experiment. Formal institutions are modeled as third-party contract enforcement while informal institutions are represented as shared group identity. Results show that trust choices increase as contract enforcement increases but are not affected by shared group identity. However, performance is more likely to occur in interactions with in-group members than out-group members.
Subjects: 
contract enforcement
exchange relations
group identity
institutions
laboratory experiments
JEL: 
C72
C91
D03
D81
Document Type: 
Working Paper

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