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The Impact of Social Ties and Third-Party Enforcement on Collective Action and Growth: Micro Evidence from Peru

Author

Listed:
  • Keefer, Philip
  • Espinoza, Mauricio
  • Espinoza, Álvaro
  • Fort, Ricardo

Abstract

Exploiting a unique empirical setting, 1,000 vendors in 90 traditional food markets in Lima, we document that historic social ties among market founders are associated, decades later, with stricter formal (third party) enforcement of market rules, more collective action, and the greater resilience of market sales to the entry of modern supermarkets. Markets with stronger historic ties make larger investments in market infrastructure, provide more services to market vendors, and exhibit more regular payment of dues. They also experienced higher growth over the period 20072017, following the entry of modern supermarkets. Formal enforcement appears to be a key mechanism through which social ties induce greater collective action: the component of formal enforcement that is explained by historic social ties is even more strongly correlated with collective action and growth. In contrast, differences in informal social enforcement are not correlated with any market outcomes. Neither is it the case that formal rules and governance structures can account for these results: these are identical across markets.

Suggested Citation

  • Keefer, Philip & Espinoza, Mauricio & Espinoza, Álvaro & Fort, Ricardo, 2019. "The Impact of Social Ties and Third-Party Enforcement on Collective Action and Growth: Micro Evidence from Peru," IDB Publications (Working Papers) 10055, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:10055
    DOI: http://dx.doi.org/10.18235/0002093
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    Cited by:

    1. Jinhua Xie & Gangqiao Yang & Ge Wang & Yaying Zhu & Zhaoxia Guo, 2023. "Substitutes or complements? Exploring the impact of environmental regulations and informal institutions on the clean energy utilization behaviors of farmers," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(5), pages 3893-3922, May.

    More about this item

    Keywords

    public goods; collective action; institutions; growth;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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