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Trust and Social Control: Sources of Cooperation, Performance, and Stability in Informal Value Transfer Systems

Author

Listed:
  • Claudius Gräbner

    (University of Duisburg-Essen
    Johannes Kepler University Linz
    ZOE. Institute for Future-Fit Economies)

  • Wolfram Elsner

    (University of Bremen)

  • Alex Lascaux

    (Russian Presidential Academy of National Economy)

Abstract

We study the functioning of informal value transfer systems through the example of Hawala. By complementing the institutional theory with computational experiments that use the first agent-based model of IVTS, we examine the roles of generalized trust and social control for the emergence, stability, and efficiency of Hawala. We show that both trust and control are necessary, but not sufficient to guarantee its functioning, and that their relationship is time-dependent. The success of Hawala also depends on population size, interaction density, and forgiveness of the agents. Finally, we provide a theoretically grounded operationalization of generalized trust and social control that is applicable to informal exchange systems in general.

Suggested Citation

  • Claudius Gräbner & Wolfram Elsner & Alex Lascaux, 2021. "Trust and Social Control: Sources of Cooperation, Performance, and Stability in Informal Value Transfer Systems," Computational Economics, Springer;Society for Computational Economics, vol. 58(4), pages 1077-1102, December.
    • Handle: RePEc:kap:compec:v:58:y:2021:i:4:d:10.1007_s10614-020-09994-0
    DOI: 10.1007/s10614-020-09994-0
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    References listed on IDEAS

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    1. Alexander Lascaux, 2015. "Crowding Out Trust in the Informal Monetary Relationships: The Curious Case of the Hawala System," Forum for Social Economics, Taylor & Francis Journals, vol. 44(1), pages 87-107, April.
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    More about this item

    Keywords

    Agent-based modelling; Game theory; Hawala; Institutions; Social control; Trust; Value transfer systems;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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