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Cooperation is vital for the sustainable development of human society. For the sustainable long-term development of human society, cooperation is essential in solving social dilemma situations ranging from local issues such as the management of local common pool resources to global issues such as climate changes. Understanding what affects cooperation and how to improve cooperation is crucial in this respect. This thesis examines factors that affect cooperation among individuals in the context of China. It starts with an assessment of an eco-certification program for agricultural products, where cooperation among a larger number of farmers is crucial for its success. Upon finding that free-riding incentives are behind the ineffectiveness of the eco-certification system in reducing agrochemical use, this thesis proceeds to explore how various contextual and institutional factors affect cooperation. First, it looks at the role of contextual factors, specifically, the role of resource scarcity in shaping cooperation in the context of irrigation agriculture. Then, it moves on to the role of punishment and reward institutions in improving cooperation with particular attention to people’s institutional preferences. And last, this thesis examines the effect of leading-by-example and leadership legitimacy on promoting cooperation. In Chapter 2, we examine the effectiveness of food certification in reducing agrochemical consumption in China. Specially, we use panel data from 4,830 different households in six provinces coving the period of 2005-2013 to test whether the adoption of certified food production reduces the use of chemical fertilizers and pesticide in China. On average, we do not find evidence support the hypothesis that adopting certified food production reduces farmers’ agrochemical consumption. The effects are heterogeneous across villages, but the heterogeneous effects show no clear pattern that is consistent with the requirement of different types of certification. We find evidence suggesting that lack of knowledge about certification among farmers, weak inspection and the monetary incentives (price premium for certified products) for farmers to defect may explain why eco-certifications largely fails to reduce agrochemical use. We interpret the role of monetary incentives in explaining the ineffectiveness of food certification in terms of a lack of cooperation among farmers. In Chapter 3, we study the impact of long-term exposure to resource scarcity on cooperation among farmers using data from a household survey and a lab-in-the-field experiment with 312 male subjects in rural northwestern China. The unique historically formed irrigation water quota system allows us to measure exogenous variation in scarcity level of available water resource within an otherwise homogenous region. We find that water scarcity improves irrigation management in term of both the irrigation-related activities and their outcomes: people living in more water scarce villages are more likely to coordinate in crop choices, more likely to keep local canals clean and higher self-reported quality of canals. More important, we find that the impact of water scarcity goes beyond irrigation-related activities. People in villages with higher level of water scarcity also make significantly higher contributions in the public goods game. This result suggests that water scarcity strengthens norms of cooperation within rural communities. In Chapter 4, we investigate how the people’s institutional preferences interact with assigned institutions in the context of public goods games and what factors are behind people’s institutional preferences using a lab-in-field experiment with 312 male subjects in rural northwestern China. We find that subjects have stronger preference for the reward institution over the punishment institution. But whether subjects’ preferred institution matches the exogenously assigned institution or not does not have significant impacts on their contributions in the public goods game. Moreover, we find that subjects who prefer punishment tend to be free-riders. This finding makes the preference for the punishment puzzling and intriguing. Neither strategic concerns nor game history can fully explain why some people prefer punishment and the negative relationship between the preference for punishment and contributions in PGGs. We further find that the there is a robust relationship between the preference for the punishment institution and certain “efficiency-reducing” or “anti-social” social preferences profiles. In Chapter 5, we look at the role of leadership and leadership legitimacy in promoting cooperation using a lab experiment with 272 college students in China. We use a special experimental design to select leaders from the procedure and manipulate leadership legitimacy perception though manipulating the information provided to the leaders. We find that having a leader improves cooperation in the public goods game. The increase of group contributions is induced by the leader’s contributions. Being a leader in makes leaders increase their contributions, and followers reciprocate but to a slightly smaller extent and thus they harvest the gains from increased group contributions. The perception of leadership legitimacy does not have additional impacts on the leaders’ contribution level and the group contribution level. But we find evidence suggesting that leadership legitimacy influences how leaders make their contributions decisions and update their beliefs in the repeated public goods game. It seems that only “legitimate” leaders show the strategic use of “leading-by-example”, not “appointed” leaders, whose higher contributions as leaders are simply a reaction to the sequential move game structure where their behavior can be observed by others. While each chapter is a stand-alone research article answering a specific research question, they all revolve around the common topic of voluntary cooperation. The existence of free-riding incentives and the lack of cooperation hamper the effort of achieving sustainable development. We set out to explore different ways to overcome free-riding incentives and achieve better cooperation among individuals. Directly or directly, these chapters also all feature the role of institutions. Proper institutions can either directly influence people’s cooperative behavior or set the ground for other factors.

Cooperation, institutions and sustainable development: empirical evidence from China