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Social Capital, Trust, and Multiple Equilibria in Economic Performance

  • Growiec, Katarzyna
  • Growiec, Jakub

We propose a novel mechanism giving rise to poverty traps and multiple equilibria in economic performance. It is a potentially important source of persistent underdevelopment across countries and regions. At the core of this mechanism, bridging social capital and social trust feed back on each other, interdependently affecting individuals' earnings and subjective well-being. High trust and abundant bridging social capital reinforce each other, leading to a "high" equilibrium where both these variables take persistently high values, and earnings and well-being are high as well, whereas low trust and lacking bridging social capital create a vicious circle, leading to a "low trust trap" where all these variables are persistently low. The workings of our theoretical model are in agreement with a wide range of findings from the contemporary literature in sociology and social psychology.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19518.

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Date of creation: 22 Dec 2009
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Handle: RePEc:pra:mprapa:19518
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  1. repec:oup:restud:v:64:y:1997:i:2:p:151-72 is not listed on IDEAS
  2. Jess Benhabib & Mark M. Spiegel, 2002. "Human capital and technology diffusion," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  3. Buly A. Cardak, 2004. "Education choice, neoclassical growth, and class structure," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 643-666, October.
  4. 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.
  5. Rangazas Peter C, 2005. "Human Capital and Growth: An Alternative Accounting," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-43, September.
  6. Sjoerd Beugelsdijk & Sjak Smulders, 2003. "Bridging and Bonding Social Capital: which type is good for economic growth?," ERSA conference papers ersa03p517, European Regional Science Association.
  7. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
  8. repec:oup:restud:v:64:y:1997:i:2:p:173-89 is not listed on IDEAS
  9. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  10. Falilou Fall, 2005. "Endogenous persistent inequality," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00196084, HAL.
  11. Helliwell, John F., 2003. "How's life? Combining individual and national variables to explain subjective well-being," Economic Modelling, Elsevier, vol. 20(2), pages 331-360, March.
  12. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  13. Growiec, Jakub & Growiec, Katarzyna, 2007. "Social Capital, Well-Being, and Earnings: Theory and Evidence from Poland," MPRA Paper 7071, University Library of Munich, Germany.
  14. Jim Davies, . "Empirical Evidence on Human Capital Externalities," Working Papers-Department of Finance Canada 2003-11, Department of Finance Canada.
  15. Robert Tamura, 2001. "Teachers, Growth, and Convergence," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1021-1059, October.
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