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A road to trust

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  • Labonne, Julien
  • Chase, Robert S.
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    Abstract

    The authors explore the relationship between transaction costs and generalized trust. Using panel data from 2,100 households in 135 rural communities of the Philippines, the paper shows that where transaction costs are reduced (proxied by road construction), there is an increase in generalized trust. Consistent with the argument that generalized trust is built through repeated interactions, the authors find that the individuals most likely to engage in exchange exhibit an increase in trust after road construction. These results suggest that, rather than being an input to economic growth, trust might be a product of reduced transaction costs (which also favors growth).

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4706.

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    Date of creation: 01 Sep 2008
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    Handle: RePEc:wbk:wbrwps:4706

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    Related research

    Keywords: Post Conflict Reconstruction; Transport Economics Policy&Planning; Rural Roads&Transport; Social Capital; Corporate Law;

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    1. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. 182, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    2. Danielson, Anders & Holm, Hakan J, 2003. "Tropic Trust versus Nordic Trust: Experimental Evidence from Tanzania and Sweden," Working Papers, Lund University, Department of Economics 2003:6, Lund University, Department of Economics.
    3. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
    4. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, American Economic Association, vol. 87(2), pages 333-38, May.
    5. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2646, C.E.P.R. Discussion Papers.
    6. Laura Schechter, 2005. "Traditional trust measurement and the risk confound: An experiment in rural paraguay," Artefactual Field Experiments, The Field Experiments Website 00106, The Field Experiments Website.
    7. Khandker, Shahidur R. & Bakht, Zaid & Koolwal, Gayatri B., 2006. "The poverty impact of rural roads : evidencefrom Bangladesh," Policy Research Working Paper Series 3875, The World Bank.
    8. Huck, Steffen & Ruchala, Gabriele K. & Tyran, Jean-Robert, 2006. "Competition Fosters Trust," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6009, C.E.P.R. Discussion Papers.
    9. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 14(3), pages 137-158, Summer.
    10. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank.
    11. Benjamin A. Olken, 2009. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 1(4), pages 1-33, October.
    12. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(3), pages 811-846, August.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    13. Andrew Leigh, 2006. "Trust, Inequality, and Ethnic Heterogeneity," CEPR Discussion Papers, Centre for Economic Policy Research, Research School of Economics, Australian National University 511, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    14. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1251-88, November.
    15. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2004-09, Center for Research in Economics, Management and the Arts (CREMA).
    16. Miguel, Edward & Gertler, Paul & Levine, David I, 2006. "Does Industrialization Build or Destroy Social Networks?," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 287-317, January.
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