We show that the growth of the service sector facilitates outsourcing, or fragmentation of production. Services link production blocks, and allows the breaking up of integrated production. The cost of aggregate service decreases as the number of specialized services increases. A country with a...

Experimental studies of social dilemmas have shown that while the existence of a sanctioning institution improves cooperation within groups, it also has a detrimental impact on group earnings in the short-run. Could the introduction of pre-play threats to punish have enough of a beneficial...

We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a...