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Social Capital, Corruption and Economic Growth: Eastern and Western Europe

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Abstract

We hypothesize, that power centralisation in a political system leads to more corruption due to the monopoly power status of bureaucrats. Corruption again would then lead to a lower level of social capital, here measured as trust, and slow down economic growth even further. Indeed, when comparing the tables and weighted averages for corruption and trust, highly corrupt countries such as those in Eastern Europe, also tend have the lowest level of trust. In general, low levels of trust (measured as general trust and civic participation) are also related to smaller Gross Domestic Product per capita levels. A similar pattern is observed within Western Europe. In the European Union, ‘Northern EU’ member states generally hold less corruption, more trust and higher Gross Domestic Product per capita compared to ‘Southern EU’ member states. In perspective, the fate of Eastern Europe could then be a lesson for how to decentralise power and accumulate trust in the future thus establishing better economic policies and the general business climate for entrepreneurship.

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Bibliographic Info

Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number 03-21.

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Length: 31 pages
Date of creation: 28 Jan 2003
Date of revision:
Handle: RePEc:hhs:aareco:2003_021

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Keywords: Social capital; trust; public policy; corruption; economic growth; Eastern Europe; Western Europe;

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  1. Paldam, Martin & Svendsen, Gert Tinggaard, 2000. "Missing social capital and the transition in Eastern Europe," Working Papers 00-5, University of Aarhus, Aarhus School of Business, Department of Economics.
  2. Paldam, Martin, 2000. " Social Capital: One or Many? Definition and Measurement," Journal of Economic Surveys, Wiley Blackwell, vol. 14(5), pages 629-53, December.
  3. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
  4. Paldam, Martin & Svendsen, Gert Tinggaard, 2000. "An essay on social capital: looking for the fire behind the smoke," European Journal of Political Economy, Elsevier, vol. 16(2), pages 339-366, June.
  5. Svendsen, G.T., 1998. "Social Capital, Economic Growth and Transition Economies," Papers 98-2, Aarhus School of Business - Department of Economics.
  6. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  7. Hans Aage, 1997. "Institutions and Performance in Transition Economies," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 24, pages 125-144.
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Cited by:
  1. Tuna, Emelj, 2011. "Foreign Direct Investments as Initiators of Change: The ”Swedmilk” dairy case- Reasons behind the failure," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116092, European Association of Agricultural Economists.
  2. Mobolaji ‘Hakeem Ishola, 2012. "Fighting corruption: an expectation augmented approach," Humanomics: The International Journal of Systems and Ethics, Emerald Group Publishing, vol. 28(2), pages 133-147, May.
  3. Dzialek, Jaroslaw, 2009. "Social capital and economic growth in Polish regions," MPRA Paper 18287, University Library of Munich, Germany.

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