Ethical choices of rational agents in our model are a fundamental cause of economic prosperity and growth and a critical factor in the development of property rights institutions. Financial transactions are a key feature, providing the channel through which morality and the institutional framework affect economic well-being. In equilibrium a more moral society gives rise to a higher rate of innovation and economic growth along with stronger protection of property rights and a more developed financial system. Furthermore, a higher degree of risk aversion enhances morality and raises the level and growth rate of output.

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