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Social Exchange and Generalized Trust in China

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Abstract

This paper examines how social relations and norms contribute to the emergence of generalized trust in economic action. Our core proposition is that the more positive the local social exchange relationship, the greater an actor’s propensity to place trust in strangers. Our research design integrates behavioral measures elicited by incentivized experimental trust games with survey data using a random sample of 540 founding CEOs of manufacturing firms in the Yangzi delta region of China. Our analysis shows that characteristics of repeated social exchange—depth, prosociality and control—are positively associated with an economic actor’s proclivity for generalized trust. Founder CEOs with deeper and more valued exchange relations are more likely to trust strangers. Likewise, we find robust evidence of a positive association between beliefs in the effectiveness of community social control and trust in strangers.

Suggested Citation

  • Nee, Victor & Opper, Sonja & Holm, Hakan J., 2014. "Social Exchange and Generalized Trust in China," Working Papers 2014:30, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2014_030
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    Keywords

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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