Free to Trust? Economic Freedom and Social Capital
AbstractWe present new evidence on how generalized trust is formed. Unlike previous studies, we look at the explanatory power of economic institutions, we use newer data, we incorporate more countries, and we use instrumental variables to handle the causality problem. A central result is that legal structure and security of property rights (area 2 of the Economic Freedom Index) increase trust. The idea is that a market economy, building on voluntary transactions and interactions with both friends and strangers within the predictability provided by the rule of law, entails both incentives and mechanisms for trust to emerge between people.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 64.
Length: 31 pages
Date of creation: 14 Jan 2005
Date of revision:
Publication status: Published in Kyklos, 2006, pages 141-169.
Contact details of provider:
Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
Web page: http://www.ratio.se/
More information through EDIRC
social capital; trust; economic freedom; rule of law; property rights; legal system;
Other versions of this item:
- Niclas Berggren & Henrik Jordahl, 2006. "Free to Trust: Economic Freedom and Social Capital," Kyklos, Wiley Blackwell, vol. 59(2), pages 141-169, 05.
- Berggren, Niclas & Jordahl, Henrik, 2005. "Free to Trust? Economic Freedom and Social Capital," Working Paper Series 2005:2, Uppsala University, Department of Economics.
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-23 (All new papers)
- NEP-CBE-2005-01-23 (Cognitive & Behavioural Economics)
- NEP-LAW-2005-01-23 (Law & Economics)
- NEP-LTV-2005-01-23 (Unemployment, Inequality & Poverty)
- NEP-REG-2005-01-23 (Regulation)
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