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Free to Trust? Economic Freedom and Social Capital

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Author Info
Berggren, Niclas () (Ratio Institute)
Jordahl, Henrik (Department of Economics)

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Abstract

We 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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File URL: http://www.nek.uu.se/pdf/wp2005_2.pdf
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Publisher Info
Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:2.

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Length: 31 pages
Date of creation: 25 Jan 2005
Date of revision:
Publication status: Published in Kyklos, 2006, pages 141-169.
Handle: RePEc:hhs:uunewp:2005_002

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research
Keywords: social capital; trust; economic freedom; rule of law; property rights; legal system;

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Find related papers by JEL classification:
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 - - - Social Norms and Social Capital; Social Networks Economic Anthropology

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References listed on IDEAS
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. Christian Bjornskov, 2003. "The Happy Few: Cross--Country Evidence on Social Capital and Life Satisfaction," Kyklos, Blackwell Publishing, vol. 56(1), pages 3-16, February.
  2. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December. [Downloadable!] (restricted)
    Other versions:
  4. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August. [Downloadable!] (restricted)
    Other versions:
  5. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 857-882, December. [Downloadable!]
  6. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2004. "Trust and economic growth: a robustness analysis," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 118-134, January.
  7. Werner Güth & Axel Ockenfels, 2002. "The Coevolution of Trust and Institutions in Anonymous and Non-anonymous Communities," Papers on Strategic Interaction 2002-07, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  8. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 565-91, September.
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Cited by:
(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. yamamura, eiji, 2009. "Effects of interactions among social capital, income, and learning from experiences of natural disasters: A case study from Japan," MPRA Paper 16223, University Library of Munich, Germany. [Downloadable!]
  2. Bjørnskov, Christian, 2007. "Social trust and the growth of schooling," Working Papers 07-6, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  3. Joshua Hall & Robert Lawson, 2008. "Theory and evidence on economic freedom and economic growth: A comment," Economics Bulletin, Economics Bulletin, vol. 15(18), pages 1-6. [Downloadable!]
  4. Eiji Yamamura, 2008. "Determinants of trust in a racially homogeneous society," Economics Bulletin, Economics Bulletin, vol. 26(1), pages 1-9. [Downloadable!]
  5. yamamura, eiji, 2008. "Learning Effect And Social Capital: A Case Study Of Natural Disaster From Japan," MPRA Paper 10249, University Library of Munich, Germany. [Downloadable!]
  6. Bjørnskov, Christian, 2006. "The Determinants of Trust," Ratio Working Papers 86, The Ratio Institute. [Downloadable!]
  7. Niclas Berggren, 2009. "Choosing one’s own informal institutions: on Hayek’s critique of Keynes’s immoralism," Constitutional Political Economy, Springer, vol. 20(2), pages 139-159, June. [Downloadable!] (restricted)
    Other versions:
  8. Akcomak, Semih, 2009. "Bridges in social capital: A review of the definitions and the social capital of social capital researchers," UNU-MERIT Working Paper Series 002, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
  9. Yamamura, Eiji, 2008. "Comparison of neighborhood trust between generations in a racially homogeneous society: A case study from Japan," MPRA Paper 10218, University Library of Munich, Germany. [Downloadable!]
  10. Fischer, Justina AV, 2009. "The Welfare Effects of Social Mobility: An Analysis for OECD countries," MPRA Paper 17070, University Library of Munich, Germany. [Downloadable!]
  11. Berggren, Niclas & Bjørnskov, Christian, 2009. "Does Religiosity Promote or Discourage Social Trust? Evidence from Cross-Country and Cross-State Comparisons," Ratio Working Papers 142, The Ratio Institute. [Downloadable!]
  12. Jordahl, Henrik, 2007. "Inequality and Trust," Working Paper Series 715, Research Institute of Industrial Economics. [Downloadable!]
  13. Johanna D'Hernoncourt & Pierre-Guillaume Méon, 2008. "The not so dark side of trust: Does trust increase the size of the shadow economy?," Working Papers CEB 08-030.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  14. Berggren, Niclas & Bergh, Andreas & Bjørnskov, Christian, 2009. "The growth effects of institutional instability," Working Papers 2009:8, Lund University, Department of Economics. [Downloadable!]
    Other versions:
  15. John Meadowcroft & Mark Pennington, 2008. "Bonding and bridging: Social capital and the communitarian critique of liberal markets," The Review of Austrian Economics, Springer, vol. 21(2), pages 119-133, September. [Downloadable!] (restricted)
  16. Niclas Berggren & Mikael Elinder & Henrik Jordahl, 2008. "Trust and growth: a shaky relationship," Empirical Economics, Springer, vol. 35(2), pages 251-274, September. [Downloadable!] (restricted)
    Other versions:
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