Trust is an important component of social capital that has been linked to improvements in macroeconomic performance. The exogeneity of trust, however, is questionable. We develop a theoretical model in which trust is endogenous and depends on three factors: institutions for capture and...

The evolution of large-scale cooperation among genetic strangers is a fundamental unanswered question in the social sciences. Behavioral economics has persuasively shown that so called "strong reciprocity" plays a key role in accounting for the endogenous enforcement of cooperation. Insofar as...

Informal contracting is widely spread, but what makes it work in the absence of institutional enforcement and repetition? According to game-theoretic models of social capital, informal relationships can help agents self-enforce contracts when third-party enforcement is not available, because...

Parents in several cultures 'discipline' their daughters to inculcate the supposedly feminine virtues. The measures taken by parents range from the benign to the brutal across societies. The paper formalizes the idea that this process can be understood as an equilibrium outcome of a signaling...

This paper argues that political institutions play an important role in shaping the evolutionary trajectory of preferences. We consider a population with two preference groups. A political institution provides the platform and a set of rules for the two groups to battle over the relative...

Going from personal to impersonal exchange seems to be a relevant feature that allows humans to develop complex societies and grow prosperous. Adam Smith’s idea of moral imagination, embodied in the impartial spectator and achieved through sympathy, may integrate and complement today’s...

Trust is an important determinant of economic development. Understanding its origins is therefore critical. We develop a principal-agent model with heterogeneous players to determine the aggregate amount of trustworthiness and trust in a society. People are distributed according to their...

We identify a new problem that may arise when heterogeneous workers are motivated by relative performance schemes: If workers' abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly...

We identify a new problem that may arise when heterogeneous workers are motivated by relative performance schemes: If workers’ abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly...