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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

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  • Growiec, Katarzyna
  • Growiec, Jakub

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. Based on cross-sectional World Values Survey 2000 data on individuals from Central and Eastern European countries (CEECs), we show that majority of citizens of these countries seem to 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 can be perceived as a potential way out of this "trap", because employed people in CEECs tend to have statistically significantly more bridging social capital and more trust. We discuss our empirical results by providing an assessment of their robustness, and pointing out the high risk of endogeneity and omitted variables bias, often overlooked in earlier studies.

Suggested Citation

  • Growiec, Katarzyna & Growiec, Jakub, 2010. "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," MPRA Paper 23350, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:23350
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    References listed on IDEAS

    as
    1. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
    2. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Alfred Marshall Lecture Social Capital as Good Culture," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 295-320, 04-05.
    3. 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.
    4. 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.
    5. Alberto Alesina & Paola Giuliano, 2010. "The power of the family," Journal of Economic Growth, Springer, vol. 15(2), pages 93-125, June.
    6. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Social Capital as Good Culture," NBER Working Papers 13712, National Bureau of Economic Research, Inc.
    7. repec:mes:jeciss:v:21:y:1987:i:1:p:528-530 is not listed on IDEAS
    8. 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.
    9. Growiec, Katarzyna & Growiec, Jakub, 2014. "Social Capital, Trust, And Multiple Equilibria In Economic Performance," Macroeconomic Dynamics, Cambridge University Press, vol. 18(02), pages 282-315, March.
    10. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
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    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.
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    Citations

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    Cited by:

    1. Jan Fidrmuc, 2012. "How Persistent is Social Capital?," CEDI Discussion Paper Series 12-04, Centre for Economic Development and Institutions(CEDI), Brunel University.
    2. Growiec, Katarzyna & Growiec, Jakub, 2014. "Social Capital, Trust, And Multiple Equilibria In Economic Performance," Macroeconomic Dynamics, Cambridge University Press, vol. 18(02), pages 282-315, March.
    3. 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.
    4. Borowiecki Ɓukasz, 2014. "Historical Roots of Generalized Trust in Polish Society," International Journal of Management and Economics, De Gruyter Open, vol. 42(1), pages 121-137, June.

    More about this item

    Keywords

    bridging social capital; bonding social capital; social trust; CEE countries; earnings; subjective well-being;

    JEL classification:

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

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