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Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation

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  • Durante, Ruben

Abstract

Extensive research has documented the importance of social trust for economic development, yet the origins of trust remain largely unexplored. This paper examines the historical relationship between risk, cooperation and the emergence of social trust. I hypothesize that norms of trust developed in preindustrial times as a result of experiences of collective action and mutual insurance triggered by the need for subsistence farmers to cope with climatic risk. These norms persisted over time, even after climate had become largely unimportant for economic activity. I test this hypothesis in the context of Europe combining high-resolution climate data for the period 1500-2000 with contemporary survey data at the sub-national level. I find that regions characterized by higher year-to-year variability in precipitation and temperature display higher levels of trust. Consistent with a theory of insurance through geographic differentiation, I also find that trust is higher in regions with more spatially heterogeneous precipitation. Furthermore, variation in social trust is driven by weather patterns during the growing season and by historical rather than recent variability. These results are robust to the inclusion of country fixed-effects, a variety of geographical controls, and regional measures of early political and economic development.

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  • Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25887
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    More about this item

    Keywords

    Trust; Risk; Cooperation; Climate; Family Ties; Persistence;
    All these keywords.

    JEL classification:

    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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