Abstract

The purpose of this paper is to examine the impact of a community’s economic characteristics on its ability to generate adherence to socially efficient norms. These norms prescribe a behavior for an individual when his/her preferred behavior imposes a negative externality on others. This paper explores social norms as a mechanism of how neighborhood characteristics can affect individual behavior. Understanding the mechanism through which community characteristics affect individual behavior is important in that it enables the development of a testable structural empirical model which is purged of the omitted variable bias arising from the potential endogeneity of the neighborhood choice.

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