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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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    References

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    1. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, 09.
    2. Scheinkman, Jose A. & Soutter, Christine L. & Glaeser, Edward Ludwig & Laibson, David I., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    3. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
    4. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
    5. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," CREMA Working Paper Series 2004-09, Center for Research in Economics, Management and the Arts (CREMA).
    6. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
    7. Benjamin A. Olken, 2006. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," NBER Working Papers 12561, National Bureau of Economic Research, Inc.
    8. Schechter, Laura, 2007. "Traditional trust measurement and the risk confound: An experiment in rural Paraguay," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 272-292, February.
    9. Huck, Steffen & Ruchala, Gabriele K. & Tyran, Jean-Robert, 2006. "Competition Fosters Trust," CEPR Discussion Papers 6009, C.E.P.R. Discussion Papers.
    10. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
    11. Benjamin A. Olken, 2006. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," Working Papers id:642, eSocialSciences.
    12. Håkan J. Holm & Anders Danielson, 2005. "Tropic Trust Versus Nordic Trust: Experimental Evidence From Tanzania And Sweden," Economic Journal, Royal Economic Society, vol. 115(503), pages 505-532, 04.
    13. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 137-158, Summer.
    14. 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.
    15. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank.
    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.
    17. repec:feb:artefa:0059 is not listed on IDEAS
    18. 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.
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