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The Role of Social Capital in Financial Development

Listed author(s):
  • Luigi Guiso
  • Paola Sapienza
  • Luigi Zingales

To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0002828041464498
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File URL: http://www.aeaweb.org/aer/data/june2004_guiso_data.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 3 (June)
Pages: 526-556

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:3:p:526-556
Note: DOI: 10.1257/0002828041464498
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