The effects of community characteristics on community social behavior

The purpose of this dissertation is to examine the impact of a community\u27s economic characteristics on its ability to generate adherence to socially efficient norms. These norms prescribe a behavior for an individual when his/her preferred behavior imposes a negative externality on others. This paper explores social norms as a mechanism of how neighborhood characteristics can affect individual behavior. Understanding the mechanism through which community characteristics affect individual behavior is important in that it enables the development of a testable structural empirical model purged of the omitted variable bias arising from the potential endogeneity of the neighborhood choice. The theoretical structure is a repeated random matching prisoner\u27s dilemma game augmented with a sanctioning strategy. Individuals have different returns to cooperative behavior in the social interaction. A community social norm is defined that prescribes behavior for mainstream and deviant individuals. A mainstream individual is one who cooperates with other mainstream individuals and ostracizes deviant individuals. Everyone else is deviant. A key component of the social norm is that it prescribes third-party sanctioning. The equilibrium proportion of individuals of each status can then be determined. There are three main comparative statics results. First, increasing the average return to mainstream behavior nonlinearly decreases the percentage of deviants. Second, decreasing the variance of returns to mainstream behavior nonlinearly reduces deviance. Finally, if the distribution of returns to mainstream behavior is below some threshold value then no individuals will choose a mainstream status, and this equilibrium is stable. Data was used to test the theoretical mechanism. The predictions of the theory are twofold. The unbiased and efficient results of the estimation are consistent with the theory. This implies that it is possible to reject a null hypothesis that there is a pure sorting model in which individuals are not influenced by their peers. Other data was used to test the results of the model. The parameter estimates are consistent with the results of the theory, although they are not extremely significant