Climate Change and (a Culture of) Cooperation in the World's Most Agricultural Countries.

Abstract

Overwhelming evidence suggests that a “culture of cooperation,” which is the implicit reward from cooperating in any economic activity, represents one of the most successful humanly devised social structures. Yet, our understanding of its determinants and impact is still limited. To clarify these issues, we propose a time inconsistency theory of state-building and we document that, in the world's most agricultural countries, adverse climate shocks push the nonelites to accumulate strong norms of cooperation. To illustrate, a strong culture signals the nonelites’ commitment to cooperate with the elites in joint investment activities despite the small expected payoff and encourages the elites to reciprocate by granting a more inclusive political process. These reforms, in turn, help convince the nonelites that a sufficient part of the investment returns will be shared via public good provision. Our estimates imply that the severity of droughts has two short run effects on agricultural output, a negative impact due to worse farming conditions and a positive effect due to stronger norms of trust and respect. Accordingly, policymakers should consider the direct and indirect impacts of climate change and favor endogenous cultural formation. Moreover, environmental policies should be designed through a more credible interdisciplinary approach.