Trust in Transition: Cross-country and Firm Evidence
AbstractThis paper uses data from a large survey of firms across 26 transition countries to examine the determinants of trust in the transition process. We first introduce a new measure of trust between firms: the level of prepayment demanded by suppliers from their customers in advance of delivery. Using this new measure, we confirm earlier findings that trust is higher where firms have confidence in third party enforcement through the legal system. However, the fairness and honesty of the courts are more important determinants of inter-firm trust than the courts’ efficiency or ability to enforce decisions. We then examine the role of business networks in building trust and find that networks based around personal ties – family and friends – and business associations actively promote the development of trust, while business networks based on enterprise insiders and government agencies do not. Finally, we find that country-level effects are significantly more important determinants of inter-firm trust than firm-level effects.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Others with number 0401007.
Length: 22 pages
Date of creation: 23 Jan 2004
Date of revision:
Note: Type of Document - pdf; prepared on Win2000; pages: 22; figures: 1
Contact details of provider:
Web page: http://184.108.40.206
transition; trust; prepayment; courts; business networks;
Other versions of this item:
- Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust In Transition: Cross Country And Firm Evidence," William Davidson Institute Working Papers Series 2004-640, William Davidson Institute at the University of Michigan.
- Martin Raiser & Alan Rousso & Franklin Steves, 2003. "Trust in transition: cross-country and firm evidence," Working Papers 82, European Bank for Reconstruction and Development, Office of the Chief Economist.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-14 (All new papers)
- NEP-CBE-2004-03-14 (Cognitive & Behavioural Economics)
- NEP-MIC-2004-03-14 (Microeconomics)
- NEP-TRA-2004-01-25 (Transition Economics)
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.:
- Blanchard, Olivier & Kremer, Michael R., 1997.
3659691, Harvard University Department of Economics.
- Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Blanchard & Michael Kremer, 1997. "Disorganization," William Davidson Institute Working Papers Series 38, William Davidson Institute at the University of Michigan.
- John McMillan & Christopher Woodruff, 1999.
"Interfirm Relationships And Informal Credit In Vietnam,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(4), pages 1285-1320, November.
- John McMillan & Christopher Woodruff, 1998. "Interfirm Relationships and Informal Credit in Vietnam," William Davidson Institute Working Papers Series 132, William Davidson Institute at the University of Michigan.
- McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
- Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999.
"Contract Enforcement in Transition,"
CEPR Discussion Papers
2081, C.E.P.R. Discussion Papers.
- Kornai, Janos, 1993. "The Evolution of Financial Discipline under the Postsocialist System," Kyklos, Wiley Blackwell, vol. 46(3), pages 315-36.
- Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003.
"The injustice of inequality,"
Journal of Monetary Economics,
Elsevier, vol. 50(1), pages 199-222, January.
- Edward L. Glaeser & Jose Scheinkman & Andrei Shleifer, 2002. "The Injustice of Inequality," Harvard Institute of Economic Research Working Papers 1967, Harvard - Institute of Economic Research.
- Edward L. Glaeser & Andrei Shleifer, 2002. "The Injustice of Inequality," NBER Working Papers 9150, National Bureau of Economic Research, Inc.
- Simon Johnson & John McMillan, 2002.
"Courts and Relational Contracts,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 18(1), pages 221-277, April.
- 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.
- Prüfer, J., 2012.
"Business Associations and Private Ordering,"
2012-094, Tilburg University, Center for Economic Research.
- Polterovich, Victor & Tonis, Alexander, 2005. "Hiring Strategies and the Evolution of Honesty," MPRA Paper 20053, University Library of Munich, Germany.
- Berulava, George, 2013. "Do Trust-Based Relations Improve Firm’s Performance? Evidence from Transition Economies," MPRA Paper 48430, University Library of Munich, Germany.
- BARTOLINI Stefano & MIKUCKA Malgorzata & SARRACINO Francesco, 2012. "Money, Trust and Happiness in Transition Countries: Evidence from Time Series," CEPS/INSTEAD Working Paper Series 2012-04, CEPS/INSTEAD.
- Simona Mateut, . "Reverse trade credit - the use of prepayments by French firms," Discussion Papers 11/12, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.