The Interdependence of Culture and Institutions in Commons Management

Devesh Rustagi (University of Frankfurt)

Abstract: Growing evidence in economist suggests the importance of culture and institutions in commons management. However, previous studies have examined the effect of these factors in isolation. This paper examines the effect of the interaction between culture and institutions for successful forest commons management and the mechanisms through which these effects unfold. The forest management outcome is measured as the number of young trees per hectare. Culture is measured as the propensity to cooperate provided others do the same in a public goods game. Institutions are measured as rules regulating the number of months in a year livestock are forbidden to graze inside the forest and on the same spot. It is considered particularly important as livestock browsing of young trees directly affects their survival. I find that groups perform best when they have both stronger propensity for cooperation and formal rules regulating livestock grazing, but not when either of these two factors is considered in isolation. Several falsification tests confirm these results by showing that the effect holds only for young trees and not mature trees. Moreover, among young trees, the effect is observed only for broadleaf trees and not coniferous trees that are unpalatable to livestock. Experimental and survey data show that this interdependence is due to two reasons. First, institutions allowing cooperators to target and punish free riders, which results in optimistic beliefs about the cooperation of others. Second, cooperators are willing to overcome the second order free rider problem associated with the enforcement of institutions by spending much more time monitoring their forest.