Beyond formal institutions: informal governance and farmer cooperation in a transition economy

Abstract Friedrich Hayek distinguished the small-group logic of local norms, interpersonal trust, and reciprocity from the impersonal rules of the Great Society. In transition settings, however, these forms of governance may coexist rather than follow a simple sequence of replacement. Using a cross-sectional Albanian orchard farm survey, we estimate OLS models, bootstrapped product-of-coefficients paths, and an exploratory interaction to examine associations among local informal-rule enforcement, interpersonal trust, reciprocity, institutional trust, and willingness to cooperate. Stronger perceived local-rule enforcement is positively associated with interpersonal trust and willingness to cooperate; interpersonal trust is strongly associated with reciprocity, and reciprocity with willingness to cooperate. Institutional trust has no statistically significant direct association with willingness to cooperate in the fully specified model, although the local-rules/cooperation association is modestly stronger at higher levels of institutional trust. Indirect-path estimates are consistent with a sequence linking local rules, trust, reciprocity, and cooperation, but the cross-sectional design cannot establish temporal or causal ordering. The study therefore provides exploratory, single-setting evidence compatible with complementarity between informal and broader institutional governance.