Trust, Overinclusive Rules, and Selective Compliance

Abstract This paper develops a theory of how social trust shapes the relationship between overinclusive formal rules, social norms, and legal enforcement. I first present a static model in which individuals face a rule that forbids an action that is sometimes harmful but often harmless. Individuals differ in prosociality, the share of civic types is interpreted as social trust, and a rule-following norm imposes a violation cost that declines with trust. Higher trust weakens this norm and induces civic types to violate the rule in harmless situations while continuing to obey when violations would be harmful, whereas opportunistic types violate in all states. As a result, higher trust can generate more harmless violations, fewer harmful violations, and higher welfare. I then embed this behavioral block in a policy environment where a government chooses enforcement intensity. Enforcement strengthens the norm but is costly. In equilibrium, low-trust societies select a rigid regime with strict enforcement and full compliance. High-trust societies instead select a flexible regime with low average enforcement intensity. In this regime, officials exercise legal discretion and selectively enforce overinclusive rules mainly in harmful cases, while typically tolerating harmless violations, which generates a stable pattern of tolerated noncompliance in harmless situations. Finally, an overlapping-generations extension endogenizes trust through cultural transmission and yields multiple steady states that differ in trust, enforcement, norms, and the prevalence of harmless versus harmful violations.