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Trust, Social Capital, and Economic Development

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Author Info
Patrick Francois (University of British Columbia and Center, Tilburg University,)
Jan Zabojnik (University of Southern California,)

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Abstract

Many argue that elements of a society's norms, culture, or social capital are central to under-standing its development. However, these notions have been difficult to capture in economic models. Here we explore a possible role for "trustworthiness" as corresponding to social capital. Individuals are trustworthy when they perform in accordance with promises, even if this does not maximise their payoffs. The usual focus on incentive structures in motivating behaviour plays no role here. Instead, we emphasise more deep-seated modes of behaviour and consider trustworthy agents being socialised to act as they do. To model this socialisation, we borrow from a process of preference evolution pioneered by Bisin and Verdier (2001). The model developed endogenously accounts for social capital and explores its role in the process of eco-nomic development. It captures in a simple, formal way the interaction between social capital and the economy's productive processes. The results obtained caution against rapid reform and provide an explanation for why late-developing countries may not easily be able to transplant the modes of production that have proved useful in the West. (JEL: O1, O3, O4, Z1) Copyright (c) 2005 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 3 (2005)
Issue (Month): 1 (03)
Pages: 51-94
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Handle: RePEc:tpr:jeurec:v:3:y:2005:i:1:p:51-94

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Basu, Kaushik, 2006. "Identity, Trust and Altruism: Sociological Clues to Economic Development," Working Papers 06-05, Cornell University, Center for Analytic Economics. [Downloadable!]
  2. Khalil, Elias, 2006. "The Roadblock of Culturalist Economics: Economic Change á la Douglass North," MPRA Paper 1045, University Library of Munich, Germany. [Downloadable!]
  3. Sjoerd Beugelsdijk & Ton Van Schaik, 2003. "Social capital and regional economic growth," ERSA conference papers ersa03p518, European Regional Science Association. [Downloadable!]
    Other versions:
  4. Giacomo Corneo & Olivier Jeanne, 2007. "Symbolic Values, Occupational Choice, and Economic Development," IZA Discussion Papers 2763, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Tabellini, Guido, 2007. "The Scope of Cooperation: Values and incentives," CEPR Discussion Papers 6534, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Nathan Nunn & Leonard Wantchekon, 2009. "The Slave Trade and the Origins of Mistrust in Africa," NBER Working Papers 14783, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Guido Tabellini, 2007. "The Scope of Cooperation: Norms and Incentives," Levine's Working Paper Archive 321307000000000866, David K. Levine. [Downloadable!]
  8. B. Curtis Eaton & Mukesh Eswaran, 2008. "Well-Being and Affluence in the Presence of a Veblen Good," Working Papers 2008-12, Department of Economics, University of Calgary, revised 07 Feb 2008. [Downloadable!]
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  9. Dominic Rohner, 2008. "Reputation, Group Structure and Social Tensions," HiCN Working Papers 40, Households in Conflict Network. [Downloadable!]
  10. repec:att:wimass:1920220 is not listed on IDEAS
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