Trust, Social Capital, and Economic Development
AbstractMany 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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Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 3 (2005)
Issue (Month): 1 (03)
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Web page: http://www.mitpressjournals.org/jeea
Other versions of this item:
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- Z1 - Other Special Topics - - Cultural Economics
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- HEIFETZ, Aviad & SHANNON, Chris & SPIEGEL, Yossi, 2003.
"What to maximize if you must,"
CORE Discussion Papers
2003047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Chris Shannon, 2003. "What to Maximize if You Must," Theory workshop papers 658612000000000044, UCLA Department of Economics.
- Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2004. "What to Maximize if You Must," Discussion Papers 1414, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2003. "What to Maximize If You Must," Game Theory and Information 0303002, EconWPA.
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