NICEP Seminar: Devesh Rustagi (University of Nottingham)

Title:  Markets, civic values, and rules

 Abstract:  Does market exposure shape civic values and rules that constrain opportunistic behavior and foster generalized cooperation? I study this question using a natural experiment from Ethiopia, which allows me to compare individuals who are from the same clan and attend the same market but vary in their distance from that market. I find a strong decline in civic values and rule formation with increase in market distance. These results arise because of livestock trade, which is susceptible to cooperation problems from asymmetric information and lack of third-party enforcement. Societies evolved different kinds of exchange structures to resolve this problem. In areas further away from markets, cooperation was sustained through individual reputation by restricting exchange between known individuals from local network. In areas closer to markets, the prospect of impersonal exchange created a demand for civic values and rules, which together with community sanctioning facilitated generalized cooperation. Distance to markets without asymmetric information and exposure to outside world have no effects.