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Trust and Social Control. Sources of cooperation, performance, and stability in informal value transfer systems

Claudius Graebner (), Wolfram Elsner () and Alexander Lascaux
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Claudius Graebner: Institute for Institutional and Innovation Economics (iino), University of Bremen, Germany,

Authors registered in the RePEc Author Service: Claudius Gräbner ()

No 62, ICAE Working Papers from Johannes Kepler University, Institute for Comprehensive Analysis of the Economy

Abstract: We study the functioning of informal value transfer systems (IVTS) with the example of Hawala. More precisely, we use computational experiments to study the roles of generalized trust and social control for the stability and efficiency of IVTS. Previous literature was ambiguous with regard to: (i) how trust and control should be operationalized formally, (ii) which, if any of the two, carries a larger relevance for the functioning of IVTS, (iii) whether (and when) they relate to each other as substitutes or complements, and (iv) how they interact with a number of other environmental conditions. Our experiments suggest answers to all these questions. We show that both trust and control are necessary, but not sufficient to guarantee the functioning of Hawala, and that other relevant conditions, such as population size, interaction density, and forgiveness of the agents, provide important contexts. Aside from clarifying these questions, we provide a theoretically grounded operationalization of generalized trust and social control that is applicable to informal exchange systems in general.

Keywords: Hawala; Computational experiment; Informal Value Transfer Systems; Institution; Social Control; Trust (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-06
New Economics Papers: this item is included in nep-cmp, nep-evo, nep-exp and nep-soc
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