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Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

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  • Dean S. Karlan

    (Yale University)

Abstract

Economic theory suggests that market failures arise when contracts are difficult to enforce or observe. Social capital can help solve these failures. The more individuals trust each other, the more able they are to contract with each other.1 Hence, many believe trust is a critical input for both macro- and microeconomic outcomes. The Trust game has become a popular tool, with many researchers conducting it in both university laboratories and field locations in developing countries (Abigail M. Barr, 2003, Joyce E. Berg et al., 1995, Edward L. Glaeser et al., 2000). These studies have found that behaviors in the Trust game correlate intuitively with individual attitudes and the relationships between players. However, these are not outcomes of real interest, but rather proxies (or correlates) for the ability to overcome market failures and complete otherwise difficult to enforce contracts.

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Bibliographic Info

Paper provided by Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. in its series Working Papers with number 182.

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Date of creation: Jul 2005
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Handle: RePEc:pri:rpdevs:gamespaper

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  1. Ernst Fehr & Lorenz Goette, 2007. "Do Workers Work More if Wages Are High? Evidence from a Randomized Field Experiment," American Economic Review, American Economic Association, vol. 97(1), pages 298-317, March.
  2. Dean Karlan & Jonathan Zinman, 2009. "Observing Unobservables: Identifying Information Asymmetries With a Consumer Credit Field Experiment," Econometrica, Econometric Society, vol. 77(6), pages 1993-2008, November.
  3. Dean S. Karlan, 2005. "Social Connections and Group Banking," Working Papers 913, Economic Growth Center, Yale University.
  4. Kennedy, Bruce P. & Kawachi, Ichiro & Prothrow-Stith, Deborah & Lochner, Kimberly & Gupta, Vanita, 1998. "Social capital, income inequality, and firearm violent crime," Social Science & Medicine, Elsevier, vol. 47(1), pages 7-17, July.
  5. Fisman, Raymond & Khanna, Tarun, 1999. "Is trust a historical residue? Information flows and trust levels," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 79-92, January.
  6. Nava Ashraf & Dean S. Karlan & Wesley Yin, 2005. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," Working Papers 917, Economic Growth Center, Yale University.
  7. Edward L. Glaeser & David Laibson & Bruce Sacerdote, 2002. "An Economic Approach to Social Capital," Economic Journal, Royal Economic Society, vol. 112(483), pages 437-458, November.
  8. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination In A Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, MIT Press, vol. 116(1), pages 351-377, February.
  9. Besley, T. & Coate, S. & Loury, G., 1992. "The economics of Rotating Savings and Credit Associations," Papers 157, Princeton, Woodrow Wilson School - Development Studies.
  10. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  11. Carol C. Bertaut & Michael Haliassos, 2001. "Debt Revolvers for Self Control," University of Cyprus Working Papers in Economics 0208, University of Cyprus Department of Economics.
  12. David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," NBER Working Papers 7879, National Bureau of Economic Research, Inc.
  13. Joseph Henrich & Robert Boyd & Samuel Bowles & Colin Camerer & Herbert Gintis & Richard McElreath & Ernst Fehr, 2001. "In search of homo economicus: Experiments in 15 small-scale societies," Artefactual Field Experiments 00068, The Field Experiments Website.
  14. Laura Schechter, 2005. "Traditional trust measurement and the risk confound: An experiment in rural paraguay," Artefactual Field Experiments 00106, The Field Experiments Website.
  15. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
  16. Abigail Barr, 2003. "Trust and expected trustworthiness: experimental evidence from zimbabwean villages," Economic Journal, Royal Economic Society, vol. 113(489), pages 614-630, 07.
  17. Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998. "Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study," Levine's Working Paper Archive 344, David K. Levine.
  18. Ernst Fehr & Joseph Henrich & Robert Boyd, 2003. "In Search of Homo Economicus: Behavioral Experiments in 15 Small- Scale Societies," Microeconomics 0305009, EconWPA.
  19. 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.
  20. Joseph Henrich & Robert Boyd & Samuel Bowles & Colin Camerer & Ernst Fehr & Herbert Gintis & Richard McElreath, 2001. "Cooperation, Reciprocity and Punishment in Fifteen Small-scale Societies," Working Papers 01-01-007, Santa Fe Institute.
  21. Christiaan Grootaert & Thierry Van Bastelar, 2002. "Understanding and Measuring Social Capital : A Multidisciplinary Tool for Practitioners," World Bank Publications, The World Bank, number 14098.
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