The economics of organizations is replete with the pitfalls of monetary rewards and punishments to motivate workers. If economic incentives do not work, what does? This paper proposes that workers’ self-image as jobholders, coupled with their ideal as to how their job should be done, can be a major work incentive. It shows how such identities can flatten reward schedules, as they solve the “principal-agent” problem. The paper also identifies and explores a new tradeoff: supervisors may provide information to principals, but create rifts within the workforce and reduce employees ’ intrinsic work incentives. We motivate the theory with examples from the classic sociology of military and civilian organizations.

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ABSTRACT Explanations of poverty, growth and development depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour. Economic experiments, especially those conducted in the field, have begun to paint a picture of economic agents in developing communities that is at variance with the traditional portrait. We review this growing literature with an eye towards preference-related experiments conducted in the field. We also offer lessons on what development economists might learn from experiments. We conclude by sharing our thoughts on how to conduct experiments in the field and then offer a few ideas for future research.

What do we know about extended families and kinship networks? What gaps in our knowledge most need to be filled? How can we best organize current work and identify priorities for future research? These questions are important for several reasons: households in developing countries depend on friends and relatives for their livelihood and sometimes their survival; help exchanged within extended families and kin networks affects the distribution of economic well-being, and this private assistance and exchange can interact with public income redistribution. Yet despite rapid recent progress there remain significant deficiencies in our understanding of the economics of extended families. Researchers confront a large and sometimes bewildering array of findings. We review and assess this literature by starting with an emphasis on standard economic concerns, most notably the possible interaction between government-provided social insurance and private kinship networks. Our review of the evidence suggests the specter of complete “crowding out,” whereby introduction or expansion of public transfers merely supplants private transfers, is exceedingly remote, though not impossible. However, numerous studies do suggest partial—but nonetheless substantial—crowding out, on the order of a 20-to-30-cent reduction in private transfers per dollar increase in public transfers. But the range of estimated effects is exceedingly wide, with many studies suggesting little private transfer response at all.

This paper contributes to the growing literature that aims at identifying and measuring the impact of social context on individual economic behavior. We develop a model of housing structure demand with neighborhood effects and neighborhood choice. Modeling neighborhood choice is of fundamental importance in estimating and understanding endogenous and contextual neighborhood effects. Controlling for non-random sorting into neighborhoods allows for unbiased estimates and provides a means for identifying endogenous neighborhood effects. Estimation of the model exploits a household-level data set that has been augmented with contextual information at two different levels (“scales”) of aggregation. One is at the neighborhood level, consisting of about ten neighbors, with the data coming from the neighborhood clusters sub-sample of the American Housing Survey. A second level is the census tract to which these dwelling units belong. These data were geocoded by means of privileged access to confidential US Census data. Our results for the neighborhood choice model indicate that individuals prefer to live near others like themselves. Our estimates of the housing structure demand equation confirm that neighborhood effects are important. In particular, one’s demand for housing depends on the mean of neighbors ’ demand for housing.

Abstract This paper studies whether structural properties of friendship networks affect individual outcomes in education. We first develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to her Katz-Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual but puts less weight to her distant friends. We then bring the model to the data by using a very detailed dataset of adolescent friendship networks. We first characterize the exact conditions on the geometry of the peer network, so that the model is fully identified. We then show that, after controlling for observable individual characteristics and unobservable network specific factors, the individual's position in a network (as measured by her Katz-Bonacich centrality) is a key determinant of her level of activity. A standard deviation increase in the Katz-Bonacich centrality increases the pupil school performance by more than 7 percent of one standard deviation.

We conduct experiments in the Þeld with people who live in urban slums to measure trust and cooperation and to see how behavior varies with demographic factors and associational measures of social capital. Overall, we Þnd high rates of contributions among Thai and Vietnamese participants in a voluntary contribution game and we see that many participants are willing to socially sanction other participants who free ride. At the individual level, we Þnd that behavior varies with many demo-graphic factors (e.g., sex, schooling, age) and with many associational factors (e.g., home ownership and community homogeneity). However, many of these correlations differ signiÞcantly between our Thai participants and our Vietnamese participants indicating the role of culture.

The lack of “social capital ” is frequently given as an explanation for why communities perform poorly. Yet to what extent can project design compensate for these community-specific constraints? I address this question by examining determinants of collective success in a costly problem for developing economies – the upkeep of local public goods. It is often difficult to obtain reliable outcome measures for comparable collective tasks across well-defined communities. In order to address this I conducted detailed surveys of community-maintained infrastructure projects in Northern Pakistan. The findings show that while community-specific constraints do matter, their impact can be mitigated by better project design. Inequality, social fragmentation, and lack of leadership in the community do have adverse consequences but these can be overcome by changes in project complexity, community participation, and return distribution. Moreover, the evidence suggests that better design matters even more for communities with poorer attributes. The use of community fixed effects and instrumental variables offers a significant improvement in empirical identification over previous studies. These results offer evidence that appropriate design can enable projects to succeed even in “bad ” communities.

While interest in social determinants of individual behavior has led to a rich theoretical literature and many efforts to measure these influences, a mature “social econometrics ” has yet to emerge. This chapter provides a critical overview of the identification of social interactions. We consider linear and discrete choice models as well as social networks structures. We also consider experimental and quasi-experimental methods. In addition to describing the state of the identification literature, we indicate areas where additional research is especially needed and suggest some directions that appear to be especially promising.

This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs that help cooperation—which for clarity we label civic capital. We argue that this definition differentiates social capital from human capital and satisfies the properties of the standard notion of capital. We then argue that civic capital can explain why differences in economic performance persist over centuries and discuss how the effect of civic capital can be distinguished empirically from other variables that affect economic performance and its persistence, including institutions and geography. Prepared for the ―Social Economics Handbook‖, edited by Jess Benhabib (NYU) Alberto Bisin (NYU) Matthew O. Jackson (Stanford) 1