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Trust and development

  • Dearmon, Jacob
  • Grier, Kevin

In this paper we examine linkages between social trust and economic development using, for the first time, a panel of data. We confirm earlier cross-sectional studies finding that trust is a significant factor in development and also show for the first time that trust significantly interacts with both investment in physical and human capital. We provide a robustness analysis of our results via a set of jackknife experiments on our main equations, and the trust coefficients and interactions are very tightly distributed, indicating that the results are not highly sample dependent. We also consider whether trust directly influences investment and find that in a panel framework it does not unless we allow for a trust-education interaction in the investment equation.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 71 (2009)
Issue (Month): 2 (August)
Pages: 210-220

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Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:210-220
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
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  11. Brock, William A. & Durlauf, Steven N., 2001. "Interactions-based models," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 54, pages 3297-3380 Elsevier.
  12. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2004. "Trust and economic growth: a robustness analysis," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 118-134, January.
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  15. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
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  17. Grier, Kevin & Grier, Robin, 2007. "Only income diverges: A neoclassical anomaly," Journal of Development Economics, Elsevier, vol. 84(1), pages 25-45, September.
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