Can Integrity Replace Institutions? Theory and Evidence

Gilad D. Aharonovitz, Nathan Skuza and Faysal Fahs

No 2730, CESifo Working Paper Series from CESifo

Abstract: Institutions are important for proper economic performance, but are replaceable by trust or other social norms. We show that when proper institutions and trust are missing, integrity of the individuals can replace them. We construct a model of a transactions-based economy with contracts preceding the transactions, and show that any one of (1) institutions, (2) trust, or (3) integrity, foster economic growth. We construct data of economic performance of social groups in Lebanon, measure integrity and other values of these groups, and use this data and data from Kenya to support one of the model’s predictions. Policy implications are discussed.

Keywords: economic development; institutions; integrity; Lebanon; social norms; trust (search for similar items in EconPapers)
JEL-codes: A13 C73 E19 O43 Z10 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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