- Goethe University Frankfurt
Monday, February 17, 2014
This paper examines the effect of other regarding preferences (conditional cooperation) on the formation of institutions by groups engaged in commons management in Ethiopia. Conditional cooperation is measured using a public goods game with 720 individuals from 52 groups. Owing to the plausible endogeneity of conditional cooperation, I use distances to mosque and market as instruments. Mosque and market locations were determined by historical events and are thus exogenous to groups. The further a group is located from a mosque and a market, the lower is its conditional cooperation. Groups with higher conditional cooperation are significantly more likely to form commons management institutions. These institutions have a large positive effect on group performance which persists over time.