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Trusting Only Whom You Know, Knowing Only Whom You Trust: The Joint Impact of Social Capital and Trust on Individuals' Economic Performance and Well-Being in CEE Countries

Author

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  • Katarzyna Growiec
  • Jakub Growiec

Abstract

This paper provides evidence that bridging and bonding social capital as well as social trust may interdependently affect individuals' earnings and subjective well-being. Paper is based on cross-sectional World Values Survey 2000 data on individuals from Central and Eastern European countries (CEECs),It is shown that majority of citizens of these countries fall in a \low trust trap" where deficits of bridging social capital and trust reinforce each other in lowering individuals' incomes and well-being. Apart from gradual modernization and economic growth, also increases in labor market participation are identified as a poten- tial way out of this \trap", because employed people in CEECs tend to have statistically significantly more bridging social capital and more trust. While assessing robustness of our empirical results, we have found a high risk of regressor endogeneity and omitted variables bias, generally overlooked in earlier studies but controlled for in the current contribution.

Suggested Citation

  • Katarzyna Growiec & Jakub Growiec, 2011. "Trusting Only Whom You Know, Knowing Only Whom You Trust: The Joint Impact of Social Capital and Trust on Individuals' Economic Performance and Well-Being in CEE Countries," EcoMod2011 2762, EcoMod.
    • Handle: RePEc:ekd:002625:2762
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    References listed on IDEAS

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    1. Growiec, Katarzyna & Growiec, Jakub, 2014. "Social Capital, Trust, And Multiple Equilibria In Economic Performance," Macroeconomic Dynamics, Cambridge University Press, vol. 18(2), pages 282-315, March.
    2. Jan Fidrmuc, 2012. "How Persistent is Social Capital?," CEDI Discussion Paper Series 12-04, Centre for Economic Development and Institutions(CEDI), Brunel University.
    3. Borowiecki Łukasz, 2014. "Historical Roots of Generalized Trust in Polish Society," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 42(1), pages 121-137, June.
    4. Beata Łopaciuk-Gonczaryk, 2012. "Mierzenie kapitału społecznego," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1-2, pages 1-24.
    5. Roxana Mihet, 2013. "Effects of culture on firm risk-taking: a cross-country and cross-industry analysis," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 37(1), pages 109-151, February.

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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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