Abstract
Abstract This paper deals with the interaction between informal sanctions imposed by social norms and formal sanctions authorized by law. While some scholars claim that the formal rule merely substitutes for the informal rule, other authors argue that formal and informal rules are complementary. If the former view is correct, we do not need the costly formal rules. If the latter view is correct, the joint use of the formal rule by the government and the informal rule by the local community would provide more efficient outcomes than the use of the informal rule in isolation. The purpose of this paper is to show whether these two rules are substitutes or complements.
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