BEE Lecture Series - Devesh Rustagi (Goethe University)

Growing evidence in social sciences suggests the importance of culture and institutions for the management of common property resources. However, previous evidence has looked at the effect of these two factors in isolation. It is now well acknowledged that culture and institutions interact and that this interaction may have large implications for outcomes, depending upon whether the two are complements or substitutes. I provide first field evidence on the effect of this interaction for the successful management of commons. Using the context of forest commons in Ethiopia, I show that groups perform better in managing their forest when both norms of cooperation and formal rules regulating forest use are stronger but not when each is considered in isolation. This is because the behavior of cooperators is belief dependent: those with optimistic beliefs cooperate but those with pessimistic ones defect. Institutions allow cooperators to overcome this problem by allowing for monitoring and punishment of free riders. Experimental and survey data confirm the importance of these mechanisms. In groups with institutions, cooperators expect lower acts of free riding, higher likelihood of free riders getting punished, and also spend twice as much time monitoring their forest than cooperators from groups without institutions.