Social Distance and Self-Enforcing Exchange

My latest paper, forthcoming in the Journal of Legal Studies:

This paper models social distance as endogenous to the choices of individuals. I show that where government is absent, large numbers of socially heterogeneous agents can use social distance-reducing signals to capture the gains from widespread trade. Although traditional reputation mechanisms of multilateral punishment break down where large populations of socially diverse agents are involved, ex ante signaling can make widespread trade self-enforcing. Inter-group trade in precolonial Africa provides evidence for this mechanism.

Read the full paper here.