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Building Social Trust: A Human Capital Approach

  • Fali Huang

    ()

    (School of Economics, Singapore Management University)

Much evidence suggests individuals differ in their predisposition to cooperate, which is essentially a component of human capital. This paper examines the role of individual cooperative tendencies and their interactions with institutions in generating social trust; it also endogenizes cooperative tendencies using a human capital investment model. Multiple equilibria and ineffciencies exist due to positive externalities. An innovative fi?nding is that, when institutions are more e¤ective in punishing defecting behaviors, more people invest in cooperative tendencies and hence the endogenous social trust is higher, though the equilibrium cooperative tendencies are lower. This paper provides a plausible explanation for many empirical and experimental results

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Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 08-2007.

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Length: 23 pages
Date of creation: Sep 2007
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:08-2007
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  1. James Heckman, 2000. "Policies to Foster Human Capital," Working Papers 0028, Harris School of Public Policy Studies, University of Chicago.
  2. Andreoni,J. & Croson,R., 1998. "Partners versus strangers : random rematching in public goods experiments," Working papers 11, Wisconsin Madison - Social Systems.
  3. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers 90-07, Rochester, Business - Managerial Economics Research Center.
  4. Ernst Fehr & Simon G�chter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
  5. Werner Güth & Hartmut Kliemt & Bezalel Peleg, 2000. "Co-evolution of Preferences and Information in Simple Games of Trust," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 83-110, 02.
  6. Weimann, Joachim, 1994. "Individual behaviour in a free riding experiment," Journal of Public Economics, Elsevier, vol. 54(2), pages 185-200, June.
  7. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
  8. Oren Bar-Gill & Chaim Fershtman, 2005. "Public Policy with Endogenous Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 841-857, December.
  9. Harvey James, 2002. "The Trust Paradox: A Survey of Economic Inquiries Into the Nature of Trust and Trustworthiness," Microeconomics 0202001, EconWPA.
  10. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 857-882, December.
  11. repec:dgr:kubcen:199789 is not listed on IDEAS
  12. Iris Bohnet & Bruno S. Frey & Steffen Huck, . "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," IEW - Working Papers 052, Institute for Empirical Research in Economics - University of Zurich.
  13. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  14. Fali Huang, 2007. "To Trust or to Monitor: A Dynamic Analysis," Working Papers 11-2007, Singapore Management University, School of Economics.
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