The Role of Social Capital in the Success of Fair Trade

Fair Trade companies have pulled off an astonishingtour de force. Despite their relatively small size and lack of resources, they have managed to achieve considerable commercial success and, in so doing, have put the fair trade issue firmly onto industry agendas. We analyse the critical role played by social capital in this success and demonstrate the importance of values as an exploitable competitive asset. Our research raises some uncomfortable questions about whether fair trade has ‘sold out' to the mainstream and whether these companies have any independent future or whether their ultimate success lies in the impact they have had on day-to-day trading behavio

Monastic governance: forgotten prospects for public institutions

To overcome agency problems, public sector reforms started to introduce businesslike incentive structures to motivate public officials. By neglecting internal behavioral incentives, however, these reforms often do not reach their stated goals. Our research analyzes the governance structure of Benedictine monasteries in order to gain new insights into solving agency problems in public institutions. A comparison is useful because members of both organizational forms, public organizations and monasteries, see themselves as responsible participants in their community and claim to serve the public good. We study monastic governance from an economic perspective. Benedictine monasteries in Baden-Württemberg, Bavaria, and German-speaking Switzerland have an average lifetime of almost 500 years, and only a quarter of them broke up because of agency problems. We argue that they were able to survive for centuries due to an appropriate governance structure, relying strongly on the intrinsic motivation of the members and internal control mechanisms. This governance approach differs in several aspects from current public sector reforms. JEL Classification: D73, G3, Z12, H83 Keywords: Public Governance, New Public Management, Public Sector Reform, Psychological Economics, Agency Problems, Monasteries, Benedictine Orde

The emergence of social structure: employer information networks in an experimental labor market

We use laboratory experiments to investigate how employers develop social structures for sharing information about the trustworthiness of job candidates, when worker opportunism is possible. The experimental data show that substantial information sharingemerges. Two types of information networks are observed. One consists of ‘anonymity networks’ where information is anonymously and voluntarily provided as a collective good for all employers to use. The other type is a ‘reciprocity network’ where information sharing is driven by the rewarding of previously given information by the requestor. In both types, the extent of information sharing depends on the costs of providing it. Moreover, information sharing enables employers to recruit trustworthy workers which creates a high quality of trading, benefiting both employer and worker