Title: Market Exposure, Civic Values and Rules

Abstract: Does markets exposure foster or erode civic values and rules necessary to constrain opportunistic behavior? Using a natural experiment on market location from Ethiopia, I compare individuals who are from the same clan and attend the same market but vary in their exposure to that market. I find a positive effect of market exposure on civic values and rule formation. This result arises because exchange occurs primarily in livestock, which is prone to cooperation problem from asymmetric information and weak state capacity. I use vignette studies to show that societies develop different types of exchange structures to mitigate this problem, which then shapes their civic values and rules. In societies far from markets, there is no need for civic values and rules, as individuals rarely attend markets and sell livestock eponymously within their social network. In societies near markets, individuals regularly attend markets, whereby impersonal exchange creates a demand for civic values and community sanctioning in the absence of which individuals will have to forego efficiency gains. Exposure to markets without asymmetric information has no effect on civic values and rules, allowing me to rule out prosperity and contact hypothesis as alternative channels.