the custom in the shadow of the formal law: an economic analysis

The Custom in the Shadow of the The Custom in the Shadow of the Formal Law: An Economic AnalysisFormal Law: An Economic Analysis

Gani Aldashev, Imane Chaara, Jean-Philippe Platteau, and Gani Aldashev, Imane Chaara, Jean-Philippe Platteau, and Zaki WahhajZaki Wahhaj

Centre for Research in Development Economics Centre for Research in Development Economics (CRED)(CRED)

University of NamurUniversity of Namur

Outline of the presentationOutline of the presentation

Introduction/motivationsIntroduction/motivations Description of the modelDescription of the model ResultsResults A dynamic frameworkA dynamic framework IllustrationsIllustrations

IntroductionIntroduction

Legal Pluralism: several law systems Legal Pluralism: several law systems coexistcoexist


Legal Pluralism: several law systems Legal Pluralism: several law systems coexistcoexist

legal system or formal law (formal legal system or formal law (formal institutions)institutions)


Legal Pluralism: several law systems coexistLegal Pluralism: several law systems coexist legal system or formal law (formal legal system or formal law (formal

institutions)institutions) customary principles or informal rules customary principles or informal rules

(informal institutions)(informal institutions)





The formal law is intended for either replacing [1] or complementing [2] the informal rule.





The formal law is intended for either replacing [1] or complementing [2] the informal rule.[1] legal pluralism is conceived of as a temporary outcome





The formal law is intended for either replacing [1] or complementing [2] the informal rule.[1] legal pluralism is conceived of as a temporary outcome [2] legal pluralism is seen as a permanent situation (different laws deal with different matters)


In the case in which legal pluralism is seen as In the case in which legal pluralism is seen as a a temporary temporary outcome, substituting the outcome, substituting the formal for the informal law may obey formal for the informal law may obey two two distinct rationalesdistinct rationales. .


In the case in which legal pluralism is seen as In the case in which legal pluralism is seen as a a temporary temporary outcome, substituting the outcome, substituting the formal for the informal law may obey formal for the informal law may obey two two distinct rationalesdistinct rationales. .

(1)formal law uniformizes, codifies and simplifies the customary rules and practices

informal rules appear to be « the foundations on which formal rules are built » (Knight [1992], North [1990])


(2) formal law aims at bringing a change (2) formal law aims at bringing a change that the custom inhibitsthat the custom inhibits

formal and informal laws are seen as formal and informal laws are seen as conflicting with each otherconflicting with each other


Two different problems can arise when legal Two different problems can arise when legal pluralism is intended to be pluralism is intended to be temporarytemporary::


Two different problems can arise when legal Two different problems can arise when legal pluralism is intended to be pluralism is intended to be temporarytemporary::

(1) There may be an uncertainty about (1) There may be an uncertainty about whether the formal law or the custom actually whether the formal law or the custom actually applies.applies.

Aoki [2001], Greif [2006]Aoki [2001], Greif [2006]

Knight [1992] Knight [1992]

Basu [2000]Basu [2000]


(2) There may be manipulation of the state of (2) There may be manipulation of the state of legal legal

pluralism by the privileged group in societies pluralism by the privileged group in societies strongly strongly

differentieted in terms of power and social status.differentieted in terms of power and social status.

ExampleExample: laws providing for formal land rights or : laws providing for formal land rights or titles (Doornbos [1975], Glazier [1985], Barrows titles (Doornbos [1975], Glazier [1985], Barrows and Roth [1989], Berry [1993], Platteau [2000], and Roth [1989], Berry [1993], Platteau [2000], Jacoby and Minten)Jacoby and Minten)


Conventional view in literature Conventional view in literature ::

Except in cases where the statutory law is Except in cases where the statutory law is grounded in customary rules which it attends grounded in customary rules which it attends to formalize and simplify, legal pluralism tends to formalize and simplify, legal pluralism tends to produce to produce neutral or negative effects.neutral or negative effects.

IntroductionIntroduction In our research projectIn our research project : : - a a more general approachmore general approach of legal pluralism of legal pluralism

IntroductionIntroduction In our research projectIn our research project : : - a a more general approachmore general approach of legal pluralism of legal pluralism- in reality, customary rules are in reality, customary rules are continuously evolvingcontinuously evolving..- the transformation of customs may partly occur as a the transformation of customs may partly occur as a

result of the existence of statutory laws which have result of the existence of statutory laws which have the effect of conferring a the effect of conferring a stronger bargaining stronger bargaining positionposition on some particular section(s) of the on some particular section(s) of the population.population.

IntroductionIntroduction In our research projectIn our research project : : - a a more general approachmore general approach of legal pluralism of legal pluralism- in reality, customary rules are in reality, customary rules are continuously evolvingcontinuously evolving..- the transformation of customs may partly occur as a the transformation of customs may partly occur as a

result of the existence of statutory laws which have result of the existence of statutory laws which have the effect of conferring a the effect of conferring a stronger bargaining stronger bargaining positionposition on some particular section(s) of the on some particular section(s) of the population.population.

« local landholding systems are not the expression « local landholding systems are not the expression of an unchanging ‘traditional law’, but the fruit of a of an unchanging ‘traditional law’, but the fruit of a process of social change, which incorporates the process of social change, which incorporates the effect of national legislation » (Lavigne Delville effect of national legislation » (Lavigne Delville [2000])[2000])


Punchline of the paper:Punchline of the paper: Even if the formal law is not resorted to in an explicit manner Even if the formal law is not resorted to in an explicit manner the simple fact that it exists and that people whose interests the simple fact that it exists and that people whose interests concur in its prescriptions can threaten to use it, might concur in its prescriptions can threaten to use it, might create a situation in which its objectives are partly met. create a situation in which its objectives are partly met.

IntroductionIntroductionPunchline of the paper:Punchline of the paper: Even if the formal law is not resorted to in an explicit Even if the formal law is not resorted to in an explicit manner, the simple fact that it exists and that people manner, the simple fact that it exists and that people whose interests concur in its prescriptions can threaten to whose interests concur in its prescriptions can threaten to use it, might create a situation in which its objectives are use it, might create a situation in which its objectives are partly met. partly met.

In this case:- we may observe a permanent coexistence of the two types of law even when the intent of the legislator is to substitute the formal law for the custom.

IntroductionIntroductionPunchline of the paper:Punchline of the paper: Even if the formal law is not resorted to in an explicit Even if the formal law is not resorted to in an explicit manner, the simple fact that it exists and that people manner, the simple fact that it exists and that people whose interests concur in its prescriptions can threaten to whose interests concur in its prescriptions can threaten to use it, might create a situation in which its objectives are use it, might create a situation in which its objectives are partly met. partly met.

In this case:- we may observe a permanent coexistence of the two types of law even when the intent of the legislator is to substitute the formal law for the custom. - legal pluralism may obtain as a self-perpetuating equilibrium outcome of strategic interactions between arbiters and claimants.

IntroductionIntroduction Our approach differs from the literature on the Our approach differs from the literature on the economic analysis of law in three respects:economic analysis of law in three respects: the study of customary judges’ behaviorthe study of customary judges’ behavior the study of the mechanism through which the the study of the mechanism through which the customary law evolves as the formal law gets customary law evolves as the formal law gets introduced or changedintroduced or changed the role of inequality is adressedthe role of inequality is adressed

IntroductionIntroduction Our approach differs from the literature on the Our approach differs from the literature on the economic analysis of law in three respects:economic analysis of law in three respects: the study of customary judges’ behaviorthe study of customary judges’ behavior the study of the mechanism through which the the study of the mechanism through which the customary law evolves as the formal law gets introduced customary law evolves as the formal law gets introduced or changedor changed the role of inequality is adressedthe role of inequality is adressed

BUTBUT we remain in the tradition of the economic we remain in the tradition of the economic analysis of law by:analysis of law by: modelling the customary judge as a rational agent modelling the customary judge as a rational agent maximizing his uilitymaximizing his uility assuming that this utility arises from prestige motives assuming that this utility arises from prestige motives and from the desire to write a decision that is close to and from the desire to write a decision that is close to the customary judge's preferences the customary judge's preferences

IntroductionIntroduction Alternative dispute resolution (ADR): Alternative dispute resolution (ADR): use of arbitration or mediationuse of arbitration or mediation

The reality of developing countries severely limits The reality of developing countries severely limits the applicability of the existing analysis of ADR:the applicability of the existing analysis of ADR: developped and developing countries differ in terms developped and developing countries differ in terms of legal integrationof legal integration competition mechanism cannot be easily translated competition mechanism cannot be easily translated into developing countries' settinginto developing countries' setting

Description of the modelDescription of the model 3 agents: 3 agents: RR, , PP and and MM


Possible verdicts Possible verdicts [0,1] [0,1]

0 being the most favourable verdict for 0 being the most favourable verdict for RR

1 being the most favourable verdict for 1 being the most favourable verdict for PP


Possible verdicts Possible verdicts [0,1] [0,1]

0 being the most favourable verdict for 0 being the most favourable verdict for RR

1 being the most favourable verdict for 1 being the most favourable verdict for PP

The mediator The mediator MM : he has a preferred verdict : he has a preferred verdict I I = the community’s dominant custom at = the community’s dominant custom at the present time. the present time.


Possible verdicts Possible verdicts [0,1] [0,1] 0 being the most favourable verdict for 0 being the most favourable verdict for RR1 being the most favourable verdict for 1 being the most favourable verdict for PP

The mediator The mediator MM : he has a preferred verdict : he has a preferred verdict I I = the community’s dominant custom at the = the community’s dominant custom at the present time. present time.

The mediator chooses a verdict The mediator chooses a verdict vvMM [0,1]. [0,1]. Therefore, the interval is his strategy set.Therefore, the interval is his strategy set.

Description of the modelDescription of the model

The formal judgeThe formal judge : : 1 1

,2 2

Fv U f f


The formal judge : The formal judge :

Reasons of the unpredictability of the Reasons of the unpredictability of the formal judge’s verdict formal judge’s verdict vvFF ::

- asymetries of informationasymetries of information- existence of several bodies of law available existence of several bodies of law available

to the formal judgeto the formal judge- the subjectivity of the judgethe subjectivity of the judge

1 1,

2 2Fv U f f


The formal judge : The formal judge :

Reasons of the unpredictability of the Reasons of the unpredictability of the formal judge’s verdict formal judge’s verdict vvFF ::

- asymetries of informationasymetries of information- existence of several bodies of law available existence of several bodies of law available

to the formal judgeto the formal judge- the subjectivity of the judgethe subjectivity of the judge

ccRR and and ccPP capture the administrative cost of capture the administrative cost of going to a formal court.going to a formal court.

1 1,

2 2Fv U f f

Description of the modelDescription of the model Once the dispute is resolved, the players Once the dispute is resolved, the players

participate in a social exchange game:participate in a social exchange game:



- the agent who appeals to the formal law is the agent who appeals to the formal law is excludedexcluded




- all non-excluded agents participate in the all non-excluded agents participate in the production of a public goodproduction of a public good





- Q(Z) Q(Z) is the benefit of the public good (is the benefit of the public good (Z = Z = A, AA, AR R , A, APP))





- Q(Z) Q(Z) is the benefit of the public good (is the benefit of the public good (Z = Z = A, AA, AR R , A, APP))

- Cost-sharing rule: each non excluded agent Cost-sharing rule: each non excluded agent KK contributes contributes CCKK(Z)(Z) to the public good ( to the public good (K K = = RR, , PP or or MM))





- Q(Z) Q(Z) is the benefit of the public good (is the benefit of the public good (Z = A, Z = A, AAR R , A, APP))

- Cost-sharing rule: each non excluded agent Cost-sharing rule: each non excluded agent KK contributes contributes CCKK(Z)(Z) to the public good ( to the public good (K K = = RR, , PP or or MM))

- We assume Q(Z) – CWe assume Q(Z) – CKK(Z) > 0, for any (Z) > 0, for any ZZ and and KK. .


MM’s utility is:’s utility is:

Where Where XX is the prestige in utility terms that the is the prestige in utility terms that the mediator acquires from having his verdict mediator acquires from having his verdict unchallengedunchallenged

( ) ( ) ( ) ( ) If his verdict is acceptedM M M Mu v X Q A C A g v I

( ) ( ) If R challenges his verdictMR RQ A C A

( ) ( ) If challenges his verdictMP PQ A C A P


RR’s utility is:’s utility is:

(1 ) If he appeals to the formal courtR F REu v c

(1 ) ( ) ( ) If he chooses and P does the sameR M Ru v Q A C A M

(1 ) ( ) ( ) If he chooses and appeals to the formal courtR F RP PEu v Q A C A M P


PP’s utility is:’s utility is:

( ) If he appeals to the formal courtP F PEu v c

( ) ( ) ( ) If he chooses and R does the sameP M Pu v Q A C A M

( ) ( ) ( ) If he chooses and R appeals to the formal courtP F PR REu v Q A C A M

Timing of the gameTiming of the game One-shot sequential gameOne-shot sequential game 3 players: the mediator, the ‘rich’ agent, the ‘poor’ agent3 players: the mediator, the ‘rich’ agent, the ‘poor’ agent


TIMINGTIMING

(1)(1) TThe institutions of the formal court are sethe institutions of the formal court are set..


TIMINGTIMING


(2)(2) MM chooses verdict chooses verdict vvMM


TIMINGTIMING



(3)(3) PP decides whether to appeal to the formal court ( decides whether to appeal to the formal court (FF); if she ); if she chooses chooses FF, the community excludes her, the social game , the community excludes her, the social game without without PP is played, and the payoffs of all parties are is played, and the payoffs of all parties are determined.determined.

Timing of the gameTiming of the game One-shot sequential gameOne-shot sequential game 3 players: the mediator, 3 players: the mediator, the ‘rich’ agent, the ‘poor’ agentthe ‘rich’ agent, the ‘poor’ agent

TIMINGTIMING



(3)(3) P P decides whether to appeal to the formal court (decides whether to appeal to the formal court (FF); if she ); if she chooses chooses FF, the community excludes her, the social game , the community excludes her, the social game without without PP is played, and the payoffs of all parties are is played, and the payoffs of all parties are determined.determined.

(4)(4) OtherwiseOtherwise, , RR decides whether to bring the case to the decides whether to bring the case to the formal court (formal court (FF); if she chooses); if she chooses F F, the community excludes , the community excludes her, the social game without her, the social game without RR is played, and the payoffs is played, and the payoffs of all parties are determinedof all parties are determined..

Timing of the gameTiming of the game One-shot sequential gameOne-shot sequential game 3 players: the mediator, 3 players: the mediator, the ‘rich’ agent, the ‘poor’ agentthe ‘rich’ agent, the ‘poor’ agent

TIMINGTIMING

(1)(1) TThe institutions of the formal court are sethe institutions of the formal court are set..(2)(2) MM chooses verdict chooses verdict vvMM

(3)(3) PP decides whether to appeal to the formal court ( decides whether to appeal to the formal court (FF); if she ); if she chooses chooses FF, the community excludes her, the social game , the community excludes her, the social game without without PP is played, and the payoffs of all parties are is played, and the payoffs of all parties are determined.determined.

(4)(4) OtherwiseOtherwise, , RR decides whether to bring the case to the decides whether to bring the case to the formal court (formal court (FF); if she chooses); if she chooses F F, the community excludes , the community excludes her, the social game without her, the social game without RR is played, and the payoffs is played, and the payoffs of all parties are determinedof all parties are determined..

(5)(5) Otherwise, both parties accept the verdict Otherwise, both parties accept the verdict vvMM, the social , the social game without exclusion is played and the payoffs of all game without exclusion is played and the payoffs of all parties are determined.parties are determined.

Equilibrium Equilibrium We solve by backward inductionWe solve by backward induction

0 1


0 1Ī

Where R is indifferent


10 I Ī


Where P is indifferent

EquilibriumEquilibrium We solve by backward inductionWe solve by backward induction

The case will go unappealed iff The case will go unappealed iff vvMM ( (II , , ĪĪ))

10 I Ī





If , , chooses I I I M I

10 I Ī



I




If , , there are two possible casesI I I



10 I Ī




If , , there are two possible casesI I I

10 I Ī



I

EquilibriumEquilibrium

(a)(a) II < < IIA critical verdict value at which the judge’s A critical verdict value at which the judge’s payoff from letting go equals that of keeping the payoff from letting go equals that of keeping the case « in » is given by the following equation:case « in » is given by the following equation:

If < If < II, , MM lets the case go to the formal court: lets the case go to the formal court:

v

( ) ( ) ( ) ( ) ( )M MP PX Q A C A g v I Q A C A

v

0 1I ĪI


(a) (a) II < < IIA critical verdict value at which the judge’s A critical verdict value at which the judge’s payoff from letting go equals that of keeping the payoff from letting go equals that of keeping the case « in » is given by the following equation:case « in » is given by the following equation:


v


v

0 1I ĪI v




v


v

0 1I ĪI

equilibrium: vF

v



If > If > II, , MM chooses chooses II and thus keeps the case in. and thus keeps the case in.

v


v

0 1I ĪI v



If > If > II, , MM chooses chooses II and thus keeps the case in. and thus keeps the case in.

v


v

0 1I ĪI v

equilibrium: I


(b) (b) II > > ĪĪA critical verdict value at which the judge’s A critical verdict value at which the judge’s payoff from letting go equals that of keeping the payoff from letting go equals that of keeping the case « in » is given bythe following equation:case « in » is given bythe following equation:

If If Ī Ī < < vv , , MM lets the case go to the formal court. lets the case go to the formal court.

v

( ) ( ) ( ) ( ) ( )M MR RX Q A C A g v I Q A C A

0 1I Ī I




v


0 1I Ī Iv




v


0 1I Ī Iv

equilibrium: vF


(b) (b) II > > ĪĪA critical verdict value at which the judge’s A critical verdict value at which the judge’s payoff from letting go equals that of keeping the payoff from letting go equals that of keeping the case « in » is given by the following equation:case « in » is given by the following equation:

If If ĪĪ > > vv , , MM chooses chooses ĪĪ and thus keeps the case in. and thus keeps the case in.

v


0 1I Ī II Ī Iv


(b) (b) II > > ĪĪA critical verdict value at which the judge’s A critical verdict value at which the judge’s payoff from letting go equals that of keeping the payoff from letting go equals that of keeping the case « in » is given by the following equation:case « in » is given by the following equation:

If If ĪĪ > > vv , , MM chooses chooses ĪĪ and thus keeps the case in. and thus keeps the case in.

v


0 1I Ī II Ī Iv

equilibrium: Ī

EquilibriumEquilibriumThe equilibrium is:The equilibrium is:

, if ( , ). In this case, the payoffs are: ( ) ( )

(1 ) ( ) ( )

M

R R

I I I I X Q A C A

u I Q A C A

( ) ( ) ( ) P Pu I Q A C A

, if . In this case, the payoffs are: ( ) ( ) ( )

(1 ) ( ) ( )

M

R R

I I I v X Q A C A g I I

u I Q A C A

( ) ( ) ( )P Pu I Q A C A

, if . In this case, the payoffs are: ( ) ( ) ( )

(1 ) ( ) ( )

M

R R

I v I I X Q A C A g I I

u I Q A C A

( ) ( ) ( )P Pu I Q A C A


, if . In this case, the payoffs are: ( ) ( )

(1 )

( )

F MR R

R F R

P F

v v I Q A C A

Eu v c

Eu v

( ) ( )PR RQ A C A

, if . In this case, the payoffs are: ( ) ( )

(1 ) ( ) ( )

F MP P

R F RP P

v v I Q A C A

Eu v Q A C A

( )P F PEu v c

Comparative staticsComparative staticsProposition 1: Proposition 1: (i)(i) An increase in f, the mean verdict of the formal An increase in f, the mean verdict of the formal

judge, raises both judge, raises both II and Ī, the respective and Ī, the respective thresholds at which thethresholds at which the ‘poor’ agent ‘poor’ agent and the and the ‘rich’ agent ‘rich’ agent are indifferent between an informal are indifferent between an informal resolution of the conflict and an appeal to the resolution of the conflict and an appeal to the formal court. formal court.

0 1I Ī

Comparative staticsComparative staticsProposition 1Proposition 1: :

(i)(i) An increase in f, the mean verdict of the formal An increase in f, the mean verdict of the formal judge, raises both judge, raises both II and Ī, the respective and Ī, the respective thresholds at which thethresholds at which the ‘poor’ agent ‘poor’ agent and the and the ‘rich’ agent ‘rich’ agent are indifferent between an informal are indifferent between an informal resolution of the conflict and an appeal to the resolution of the conflict and an appeal to the formal court. formal court.

0 1I ĪI Ī



An increase in φ, which corresponds to a An increase in φ, which corresponds to a decrease in the variance of the formal verdict, decrease in the variance of the formal verdict, raisesraises II and decreases Ī. and decreases Ī.

0 1I ĪI Ī

0 1I Ī



An increase in φ, which corresponds to a An increase in φ, which corresponds to a decrease in the variance of the formal verdict, decrease in the variance of the formal verdict, raisesraises II and decreases Ī. and decreases Ī.

0 1I ĪI Ī

0 1I ĪI Ī

Comparative staticsComparative staticsProposition 1: Proposition 1:

(ii)(ii) An increase in An increase in ccPP, the cost of access to the formal , the cost of access to the formal court forcourt for the the ‘poor’ agent‘poor’ agent, decreases his , decreases his threshold verdict threshold verdict II. Similarly, an increase in . Similarly, an increase in ccRR, , the cost of access to the formal court for the the cost of access to the formal court for the ‘rich’ agent‘rich’ agent, increases his threshold verdict Ī., increases his threshold verdict Ī.

0 1I Ī



0 1I ĪI



0 1I ĪI Ī


(iii)(iii) An increase in the net benefit from the social An increase in the net benefit from the social game, expands the interval game, expands the interval ((II , , ĪĪ)) in which both in which both parties are satisfied with the verdict of the parties are satisfied with the verdict of the mediator.mediator.

0 1I Ī


(iii)(iii) An increase in the net benefit from the social An increase in the net benefit from the social game, expands the interval game, expands the interval ((II , , ĪĪ)) in which both in which both parties are satisfied with the verdict of the parties are satisfied with the verdict of the mediator.mediator.

0 1I ĪI Ī

Comparative statics Comparative statics

Proposition 2:Proposition 2:(i)(i) An increase in X, the prestige associated with An increase in X, the prestige associated with

mediating a case, raises , the upper mediating a case, raises , the upper threshold above which the mediator lets the threshold above which the mediator lets the case go to the formal court and lowers , the case go to the formal court and lowers , the corresponding lower threshold. corresponding lower threshold.

v

v

10 I v




v

v

10 I v v




v

v

10 I v v I Ī




v

v

10 I v vI Ī




v

10 I I Ī

v

v v




10 Iv

v

v




10 Ivv

v

v




10 I Ī Ivv

v

v


Proposition 2:Proposition 2:(ii)(ii) An increase in the net gain to the mediator An increase in the net gain to the mediator

from the participation of the ‘rich’ agent in the from the participation of the ‘rich’ agent in the social game lowers Correspondingly, an social game lowers Correspondingly, an increase in the net gain to the mediator from increase in the net gain to the mediator from the participation of the ‘poor’ agent in the the participation of the ‘poor’ agent in the social game, increases .social game, increases .

10 Iv

v

v




10 Ivv

v

v




10 Ivv

0 I 1

v

v

v




10 Ivv

0 I 1v

v

v

v

Dynamic frameworkDynamic framework Community size matters:Community size matters:- Y (n)Y (n) increasing and concaveincreasing and concave- X (n)X (n) increasing and concaveincreasing and concave

Dynamic frameworkDynamic framework Community size matters:Community size matters:- Y (n)Y (n) increasing and concaveincreasing and concave- X (n)X (n) increasing and concaveincreasing and concave The community consists of The community consists of NN individuals either individuals either

rich or poor.rich or poor.


rich or poor.rich or poor. The population is heterogenous. The agents The population is heterogenous. The agents

differ in terms of their outside option.differ in terms of their outside option.

F(ω)F(ω) is the fraction of the population whith a is the fraction of the population whith a per period outside option below per period outside option below ωω..





In any period, a fraction In any period, a fraction δδ of the population is of the population is engaged in disputes.engaged in disputes.





In any period, a fraction In any period, a fraction δδ of the population is of the population is engaged in disputes.engaged in disputes.

The informal judge chooses a unique within The informal judge chooses a unique within any period t.any period t.

Mtv

Dynamic frameworkDynamic framework Given , a threshold value for which the Given , a threshold value for which the

poor agent is indifferent between choosing the poor agent is indifferent between choosing the informal and the formal court is given by :informal and the formal court is given by :

Mv

( ) ( ) ( )M F PY n u v Eu v c

Dynamic frameworkDynamic framework LetLet ( , ) ( ( , ))M MH n v F n v

n, community size

H(n,v)

Dynamic framework: the steady stateDynamic framework: the steady state AndAnd *( ) max : ( , )M M n

n v n H n vN

n, community size

H(n,v)

n*( v)

Dynamic framework: the steady stateDynamic framework: the steady state AndAnd

If , a process of exclusion will make If , a process of exclusion will make the population shrink until the size . the population shrink until the size .

*( ) max : ( , )M M nn v n H n v

N

*( )Mn v N*n

n, community size

H(n,v)

n*( v)

Dynamic framework: the steady stateDynamic framework: the steady state AndAnd

If , a process of exclusion will make the If , a process of exclusion will make the population shrink until the size . population shrink until the size .

If , the exclusion process will never If , the exclusion process will never begin.begin.

*( ) max : ( , )M M nn v n H n v

N

*( )Mn v N

*( )Mn v N

*n

n, community size

H(n,v)

n*( v)

Dynamic framework: the steady stateDynamic framework: the steady state A change in any of the parameters A change in any of the parameters

affects for each affects for each nn and and v v and gives rise to a and gives rise to a new steady statenew steady state. .

, and Pc f



n, community size

H(n,v)

n*( v)cP

, and Pc f

- higher steady statePc



, and Pc f

- higher steady state

- and lower steady state

Pc

f

n, community size

H(n,v)

n*( v)cP

Dynamic frameworkDynamic framework The choice of is endogenous to the The choice of is endogenous to the

strategy of the informal judge. The custom strategy of the informal judge. The custom that maximises the steady-state level of utility that maximises the steady-state level of utility for the informal judge is given by:for the informal judge is given by:

Mv

* *arg max ( ( )) ( )M

vv X n v g v I

Dynamic framework: comparative Dynamic framework: comparative staticsstatics

Proposition 4:Proposition 4:

*

*

If '( ) 0, is :

(i) decreasing in

(ii) increasing in and in

And is:

(iii) increasing in

(iv) decreasing in and in

M

P

P

f v

c

f

n

c

f

Dynamic frameworkDynamic framework If it is too costly for the informal judge to adapt If it is too costly for the informal judge to adapt

the custom, he will choose , which will the custom, he will choose , which will lead to the exodus of all the poor people of the lead to the exodus of all the poor people of the community. In this case, we have:community. In this case, we have:

Mv I

n, community size

H(n, I)

Dynamic framework: the effect of Dynamic framework: the effect of inequalityinequality

The optimal choice of law for the informal judge The optimal choice of law for the informal judge depends on the distribution of outside options in depends on the distribution of outside options in the poor section of the community.the poor section of the community. Let’s take 2 different distributions Let’s take 2 different distributions ::

1 2F F. and .

n 1

2 1F n v,

1 1F n v,

n , c o m m u n i t y s i z e


The two effects of an increase in inequality are The two effects of an increase in inequality are described in the following graphs:described in the following graphs:

1 1

F n v,

2 1

F n v,F 2 ( ω ( n , v 1 ) )

n1

n1

‘ P i v o t ’ ‘ S h i f t ’


Proposition 5:Proposition 5:

The impact of increasing inequality on the custom can The impact of increasing inequality on the custom can be decomposed into two effects.be decomposed into two effects.

First, the ‘pivoting’ of the distribution of outside options First, the ‘pivoting’ of the distribution of outside options tends to make the custom less favorable to the poor.tends to make the custom less favorable to the poor.

Second, the shift in the distribution makes the custom Second, the shift in the distribution makes the custom more or less pro-poor, depending on whether the more or less pro-poor, depending on whether the outside option of the individual who is indifferent outside option of the individual who is indifferent between the two legal systems in the initial steady-between the two legal systems in the initial steady-state gains or loses in the redistribution.state gains or loses in the redistribution.

Welfare analysisWelfare analysis

The aggregate social welfare of the poor The aggregate social welfare of the poor individuals in the population is given by:individuals in the population is given by:

M F PF Y n uv Euv c dFmax

*( ) ( ) ( ) ( ) ( )



The marginal effect on social welfare of a pro-The marginal effect on social welfare of a pro-poor legal reform is :poor legal reform is :


*( ) ( ) ( ) ( ) ( )

1M F

Mdn dv dEuvn Y n u v n

df df df

** * * ( )

'( ) '( ) ( )



The marginal effect on social welfare of a pro-The marginal effect on social welfare of a pro-poor legal reform is :poor legal reform is :

A legal reform that makes the formal law more A legal reform that makes the formal law more favourable to the poor has favourable to the poor has three distinct effectsthree distinct effects on the welfare of the poor.on the welfare of the poor.


*( ) ( ) ( ) ( ) ( )

1M F

Mdn dv dEuvn Y n u v n

df df df

** * * ( )

'( ) '( ) ( )


Under what conditions a moderate pro-poor reform Under what conditions a moderate pro-poor reform can be superior to a radical reform?can be superior to a radical reform?

Proposition 6Proposition 6

If the elasticity of the marginal benefit of the scial If the elasticity of the marginal benefit of the scial game with respect to the size of the community is game with respect to the size of the community is below 1 and utility is linear in the outcome of a below 1 and utility is linear in the outcome of a dispute, then either abiding by the custom or dispute, then either abiding by the custom or carrying out a radical reform dominates a moderate carrying out a radical reform dominates a moderate reform in the formal law in terms of the social reform in the formal law in terms of the social welfare of the poor. welfare of the poor.


If the net benefit from the social exchange game is If the net benefit from the social exchange game is sufficiently sensitive to the size of the community sufficiently sensitive to the size of the community and if the utility function is sufficiently concave, the and if the utility function is sufficiently concave, the social welfare function is concavesocial welfare function is concave, implying that the , implying that the implementation of a moderate law is the optimal implementation of a moderate law is the optimal reform.reform.

IllustrationsIllustrations The case of women’s inheritance rights in the The case of women’s inheritance rights in the

Senegal river valley:Senegal river valley:


Senegal river valley:Senegal river valley:- Muslim populationMuslim population- Qur’anic prescription vs. customary principleQur’anic prescription vs. customary principle


Senegal river valley:Senegal river valley:- Muslim populationMuslim population- Qur’anic prescription vs. customary principleQur’anic prescription vs. customary principle- Important benefits from the social game for Important benefits from the social game for

womenwomen



womenwomen- Over the last decade, the cost of being Over the last decade, the cost of being

excluded from the social game has fallenexcluded from the social game has fallen



womenwomen- Over the last decade, the cost of being Over the last decade, the cost of being

excluded from the social game has fallenexcluded from the social game has fallen- Educational and employment opportunities Educational and employment opportunities

enable the more progressively-minded women enable the more progressively-minded women to reveal preferences and to manifest to reveal preferences and to manifest opposition against customary practices. opposition against customary practices.



womenwomen- Over the last decade, the cost of being excluded Over the last decade, the cost of being excluded

from the social game has fallenfrom the social game has fallen- Educational and employment opportunities enable Educational and employment opportunities enable

the more progressively-minded women to reveal the more progressively-minded women to reveal preferences and to manifest opposition against preferences and to manifest opposition against customary practices. customary practices.

- Recently, we observe an evolving practice of Recently, we observe an evolving practice of transfers to compensate women from their transfers to compensate women from their exclusion from inheritance.exclusion from inheritance.

In urban areas, when women’s organisations are In urban areas, when women’s organisations are active, the fall in cost of access to court makes a active, the fall in cost of access to court makes a recourse to it more attractive, potentially so recourse to it more attractive, potentially so much more attractive that the custom does not much more attractive that the custom does not evolve at all.evolve at all.


In India (Jharkand), the Santal Pargana Tenancy In India (Jharkand), the Santal Pargana Tenancy Act (1949) recognises women’s inheritance rights Act (1949) recognises women’s inheritance rights through marriage to a resident son-in-law but through marriage to a resident son-in-law but only if there is no male heir in the woman’s only if there is no male heir in the woman’s family. It had an effect because this law does not family. It had an effect because this law does not represent too radical a departure from custom.represent too radical a departure from custom.


In India (Jharkand), the Santal Pargana Tenancy In India (Jharkand), the Santal Pargana Tenancy Act (1949) recognises women’s inheritance rights Act (1949) recognises women’s inheritance rights through marriage to a resident son-in-law but through marriage to a resident son-in-law but only if there is no male heir in the woman’s only if there is no male heir in the woman’s family. It had an effect because this law does not family. It had an effect because this law does not represent too radical a departure from custom.represent too radical a departure from custom.

Same conclusion in the case of Law N° 98-750 Same conclusion in the case of Law N° 98-750 (1998) in the Côte d’Ivoire, which grants long-(1998) in the Côte d’Ivoire, which grants long-term leasehold rights to immigrant farmers.term leasehold rights to immigrant farmers.

When land becomes quite scarce, the custom When land becomes quite scarce, the custom evolves regressively (the preferred judgement of evolves regressively (the preferred judgement of customary authoritycustomary authority, I, , I, moves closer to zero)moves closer to zero),, with the result that women have more incentive with the result that women have more incentive to appeal to the modern court.to appeal to the modern court.

ConclusionConclusion

There may little gain from a strong state There may little gain from a strong state bent on imposing radical reforms even in bent on imposing radical reforms even in the name of equity. the name of equity.

It may be more effective for the state to It may be more effective for the state to exert its influence in an indirect manner exert its influence in an indirect manner that does not overlook the custom.that does not overlook the custom.

the custom in the shadow of the formal law: an economic analysis

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