| Institutions are an important determinant of a society's economic performance. To understand why institutions affect economic activity we have to understand how they affect people's incentives in the economy. The patterns of social interaction and beliefs in a society determine the choice of institution. This dissertation focuses on societies where interactions in groups and networks are important. For these societies consider two particular aspects of an economy: contract enforcement and marriage markets.; Pre-colonial India had a thriving economy that was able to sustain a high degree of division of labor. At the same time there is not much evidence of a well developed court system which is puzzling because for economic activity to take place a means of contract enforcement is vital. Chapter 2 of this dissertation argues that India did have a means of contract enforcement, in the form of the caste system, an important and persistent Indian institution, which is not well understood. It formalizes a model of the caste system that argues that contracts were enforced using a specific form of collective punishments to punish consumers who default on payments. Based on this, various observed features of the caste system like occupational specialization by caste, a purity scale for occupations, purity restrictions by caste, and a hierarchy of castes are shown to be equilibrium outcomes that improve the efficiency of contract enforcement.; The caste system requires strong networks and gaining access to a better network could be valuable. Marriages are a way of maintaining and gaining networks. As families compete for the best match payments from one side to the other could arise. Chapter 3 explores the determinants of the direction and recipient of these flows. Specifically, it considers the importance of network benefits versus benefits from the couple. The prediction is that as networks lose importance, societies will move from the bride's family receiving payments (bride price) to one where they make payments (dowry). Chapter 1 highlights the contribution of these chapters relative to the literature. |
