- Endogenous (in)formal institutions
- Number of pages
- Amsterdam: University of Amsterdam
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
Interfacultary Research Institutes
- Amsterdam School of Economics Research Institute (ASE-RI)
Amsterdam Center for Law & Economics (ACLE)
Despite the substantial evidence documenting the relevance of democracy and a
culture of cooperation, we still lack a framework that identies their origins and interaction.
In a model in which citizens and elite members try to share consumption risk
and cooperate in investment, we show that the elite's willingness to grant democracy
is mainly driven by investment-specic factors, and accumulation of culture has an
inverted U-shaped relationship with the forces aggravating consumption risk. Also,
shocks shrinking the investment value can push the citizens to over-invest in culture to
credibly commit to future cooperation and so preserve democracy. This is consistent
with the geography and the evolution of monasticism and politics in medieval Europe.
- September 7, 2014
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