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Trust, social capital and economic development

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Author Info
Francois, P.
Zabojnik, J. (Tilburg University, Center for Economic Research)

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Abstract

Many argue that elements of a society s norms, culture or social capital are central to understanding its development. However, these notions have been difficult to capture in economic models. Here we argue that trustworthiness is the economically relevant component of a society s culture and hence comprises its social capital. Individuals are trustworthy when they perform actions they have promised, even if these do not maximize their payoffs. The usual focus on incentive structures in motivating behaviour plays no role here. Instead, we emphasize more deep-seated modes of behaviour and consider that trustworthy agents are socialized to act as they do. To model this socialization, we borrow from a relatively new 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 economic development. It captures in a simple, formal way the interaction between social capital and the economy s productive process. The results obtained caution against rapid reform, provide an explanation for why late developing countries cannot easily transplant the modes of production that have proved useful in the West, and suggest an explanation for the pattern of reform experiences in ex-communist countries.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 116.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:2003116

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Find related papers by JEL classification:
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
Z1 - Other Special Topics - - Cultural Economics

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(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. Sjoerd Beugelsdijk & Ton Van Schaik, 2003. "Social capital and regional economic growth," ERSA conference papers ersa03p518, European Regional Science Association. [Downloadable!]
    Other versions:
  3. Giacomo Corneo & Olivier Jeanne, 2007. "Symbolic Values, Occupational Choice, and Economic Development," IZA Discussion Papers 2763, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Guido Tabellini, 2007. "The Scope of Cooperation: Norms and Incentives," Levine's Working Paper Archive 321307000000000866, David K. Levine. [Downloadable!]
  5. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Khalil, Elias, 2006. "The Roadblock of Culturalist Economics: Economic Change á la Douglass North," MPRA Paper 1045, University Library of Munich, Germany. [Downloadable!]
  7. 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)
  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!]
    Other versions:
  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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