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Institutions, Social Norms and Well-being - WP 02/12

4  Channels through which Governance and Social Norms Impact on Well-being (continued)

Table 2: Channels – The Contribution of Social Norms to Well-being
Channel Mechanism Evidence

Direct routes

   

1  Through facilitating greater participation in all spheres, meeting human needs for sociability, recognition and identity

Norms of fairness, reciprocity and individual responsibility reduce barriers to inter-personal relations, by reducing transaction costs and enhancing generalized trust

Knack and Keefer (1997)

2  Through protecting important political, civil and individual freedoms that are themselves constitutive of well-being Constitutional conventions guide the legitimate use of coercive power by governments, and constrain the abuse of power (as suggested by Palmer, 1993) Ostrom (2000)
3  Through promoting physical safety and security and reducing conflict Norms of non-violence, fairness and respect for the rights and interests of minors and other vulnerable groups reduce the incidence of violence and exploitation in the community, and reduce the extent of conflict  

Indirect routes

   

4  Through higher economic output

Social divisions, in terms of ethnicity and income, and corrupt public institutions, result in an inability to generate social consensus, reducing the ability to adjust to economic shocks

Rodrik (1999 and 2000)Easterly (1999 and 2000)

  Trust and shared values reduce transaction costs in the private sector; and may encourage investment Knack and Keefer (1997) La Porta et al (1996) Guiso et al (2000)
  The norm of reciprocity facilitates the production of local public goods and the management of common pool resources Ostrom (2000)
  The norm of fairness reduces the room for conflict, and helps settle conflict when it does occur, thus reducing transaction costs and increasing economic growth Experimental evidence on the existence of a norm of fairness and its effects on individual behaviour (cited in Gorringe, 1995)
  Trust and shared values increase state effectiveness through voluntary compliance with laws, taxes and regulations La Porta et al (1997)
5 Through higher non-economic output Norms of fairness and reciprocity facilitate a higher level of output by civil society organisations  
Virtuous and vicious circles    

6 Interactions between trust and the effectiveness of institutions

Trust enhances the effectiveness of institutions, which in turn builds further trust

La Porta et al (1997)

7 Interactions between shared values and economic growth Social cohesion may contribute to higher economic output (as above); and economic growth may in turn contribute to social cohesion by changing individual’s subjective feelings about the degree of well-being they derive from belonging to their society (as suggested by Gorringe, 1995, and Bates, 1996)  
8 Interactions between civil strife and quality of governance In the presence of two or three large competing ethnic groups, weak governments are associated with civil strife Collier and Hoeffler (1998)
Low level equilibrium trap    
9 Lack of trust can be very difficult to break down A lack of generalized inter-personal trust is associated with lack of social and economic interactions. In the absence of such interactions, it is difficult to revise one’s view of the trustworthiness of others. In a low trust society it is rational to exploit others rather than to trust them Putnam (1993)
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