Culture and Prevalence of Sanctioning Institutions

The interplay of culture and institutions is of high relevance for the economic well-being of societies. Identifying causality between culture and institutions, however, is difficult using field data. Trajectories based on country-specific histories can influence the adoption and the success of institutions in different societies. To investigate the causal impact of culture on the acceptance and prevalence of sanctioning institutions, we report the results of controlled lab experiments in two countries with different cultural trajectories: Germany and Turkey. We find, if a sanctioning institution is one of two alternatives that individuals can freely choose in an endogenous choice setting, then it is the clear winner against a non-sanctioning institution, both in Germany and Turkey. Though there are some differences in initial institutional preferences and contributions, the dynamics of institution choice, the evolution of contributions and sanctioning behavior are remarkably similar in both countries. This result is in contrast with previous studies which show that exogenous sanctioning institutions perform well in establishing cooperation in Germany, but substantially less so in Turkey.