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The Determinants of Trust

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During the last 15 years, the social capital literature has grown rapidly. In particular after Robert Putnam’s (1993) study of regional governments in Italy, the interest among economists and politologists exploded as Putnam showed that the concept could be used in quantitative explanations of a series of social and economic phenomena. The early literature was unavoidably indiscriminate as to distinguishing between the various elements of social capital, but more recent literature has stressed the need to distinguish between the constituent elements of Putnam’s social capital concept, in particular emphasizing the role of social trust. This is in turn defined as the confidence people have that strangers, i.e. fellow citizens on whom they have no specific information, will not take advantage of them (Uslaner, 2002; Bjørnskov, 2006). Using the answers to the World Values Survey question “In general, do you think that most people can be trusted?”, the by now quite substantial literature has found that social trust is associated with a set of different macroeconomic outcomes: economic growth, the rule of law and overall quality of governance, corruption, education, the extent of violent crime and subjective well-being are all influenced by the propensity of people within any nation to trust each other. The questions are therefore where trust comes from and whether or not it can be affected by public policy. The answers to these questions seem to divide researchers into two camps: the optimists and the pessimists. The former group may be best represented by Knack and Zak (2002) who estimate the effects of education and the rule of law alongside a set of factors that cannot be influenced in the short to medium run. The pessimist group, on the other hand, does not find much of a role for policy as they argue that the empirical associations between social trust and e.g. education or rule of law reflect the reverse causal direction, i.e. that trust has caused part of the cross-country differences in these factors. The aim of this paper is to assess the impact of a number of the central factors proposed in the literature and sort out which of those factors are associated with social trust. Although it to some extent rests on earlier work in Uslaner (2002) and Bjørnskov (2005), the paper differs from earlier studies in using a much larger sample of countries and including extra factors. It moreover distinguishes between factors affecting individuals’ trust radii and social distance, respectively, and explores indirect effects.

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Bibliographic Info

Paper provided by The Ratio Institute in its series Ratio Working Papers with number 86.

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Length: 25 pages
Date of creation: 23 Mar 2006
Date of revision:
Publication status: Forthcoming in European Sociological Review.
Handle: RePEc:hhs:ratioi:0086

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Keywords: trust; social capital; institutions; rule of law;

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References

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  1. Paldam, M. & Svendsen, G.T., 2000. "Missing Social Capital and the Transition in Eastern Europe," Papers 00-5, Aarhus School of Business - Department of Economics.
  2. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  3. Terrence Casey, 2004. "Social Capital and Regional Economies in Britain," Political Studies, Political Studies Association, vol. 52, pages 96-117, 03.
  4. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  5. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-60, June.
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  7. Timothy W. Guinnane, 2005. "Trust: A Concept Too Many," Working Papers 907, Economic Growth Center, Yale University.
  8. Knack, Stephen, 2000. "Social capital and the quality of Government : evidence from the U.S. States," Policy Research Working Paper Series 2504, The World Bank.
  9. Steven N. Durlauf, 2002. "On the Empirics of Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 459-479, November.
  10. Lederman, Daniel & Loayza, Norman & Menendez, Ana Maria, 2002. "Violent Crime: Does Social Capital Matter?," Economic Development and Cultural Change, University of Chicago Press, vol. 50(3), pages 509-39, April.
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  14. Buchan, Nancy & Croson, Rachel, 2004. "The boundaries of trust: own and others' actions in the US and China," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 485-504, December.
  15. Berggren, Niclas & Jordahl, Henrik, 2005. "Free to Trust? Economic Freedom and Social Capital," Ratio Working Papers 64, The Ratio Institute.
  16. David Henderson & Robert M McNab & Tamas Rozsas, 2004. "The Hidden Inequality In Socialism," Development and Comp Systems 0411012, EconWPA.
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Cited by:
  1. Thomas Farole & Andrés Rodríguez-Pose & Michael Storper, 2007. "Social capital, rules, and institutions: A cross-country investigation," Working Papers 2007-12, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  2. Vitaliy Zheka, 2006. "Corporate Governance and Firm Performance in Ukraine," CERT Discussion Papers 0605, Centre for Economic Reform and Transformation, Heriot Watt University.

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