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Trust, Landscape, And Economic Development

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  • Sherif Khalifa

    (California State University, Fullerton, USA)

Abstract

This paper examines the effect of trust on economic development. The key difficulty in estimating a causal effect of trust on economic development, is that it is endogenous to economic development. Therefore, to identify a causal effect from a cultural variable such as trust to economic development, we have to find some exogenous source of variation in trust. This paper estimates the effect of trust on economic development using new instrumental variables. The instruments used for trust are the mean elevation and the terrain ruggedness. In this context, the paper examines the relationship between trust and the logarithm of real Gross Domestic Product per capita. The paper focuses on trust in people from another nationality, trust in people from another religion, trust in people you know personally, trust in people you meet for the first time, trust in your family, and trust in your neighborhood. The results show that these variables have a statistically significant positive association with economic development. These results are robust after the inclusion of control variables such as the fractionalization indicator, continental dummies, and indicators for the legal origin and the colonial origin. The paper also conducts two stage least squares regressions. The second stage is a regression of the logarithm of real Gross Domestic Product per capita on each of the trust variables. In the first stage, the geographic factors that statistically explain trust, such as elevation and terrain ruggedness, are used as instrumental variables. The results of the empirical estimation show that trust, instrumented by these geographic variables, explain cross country variations in economic development.

Suggested Citation

  • Sherif Khalifa, 2016. "Trust, Landscape, And Economic Development," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(1), pages 19-32, March.
    • Handle: RePEc:jed:journl:v:41:y:2016:i:1:p:19-32
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    References listed on IDEAS

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    Cited by:

    1. Natalia Candelo & Angela C. M. Oliveira & Catherine Eckel, 2023. "Trust among the poor: African Americans trust their neighbors, but are less trusting of public officials," Public Choice, Springer, vol. 196(3), pages 427-452, September.
    2. Chowdhury, Mohammad Tarequl Hasan & Rahman, Muhammad Habibur & Ulubasoglu, Mehmet Ali, 2018. "Geography Dictates, But How? Topography, Spatial Concentration and Sectoral Diversification," MPRA Paper 87245, University Library of Munich, Germany.
    3. Leszek Sieczko & Anna Justyna Parzonko & Anna Sieczko, 2021. "Trust in Collective Entrepreneurship in the Context of the Development of Rural Areas in Poland," Agriculture, MDPI, vol. 11(11), pages 1-26, November.

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    More about this item

    Keywords

    Geography; Trust; Economic Development;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • Z1 - Other Special Topics - - Cultural Economics

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