Trust and Vulnerability
By facilitating mutually beneficial transactions, trust is a crucial ingredient for economic development. We explore the determinants of trust by studying a model in which agents rely on imperfectly enforceable contracts to support cooperation in a prisoners’ dilemma production game. We show how a fundamental relationship between vulnerability and trust emerges when players observe private signals of the strength of contract enforceability, even in the limit as signal noise vanishes. In uncovering this relationship, the model demonstrates the importance of social institutions in the development process. We show stronger social institutions, by reducing vulnerability, increase equilibrium trust, promote the use of superior technologies, and interact with formal legal institutions.
|Date of creation:||Oct 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Australian School of Business Building, Sydney 2052|
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ken Jackson, 2013. "Contract Enforceability and the Evolution of Social Capital," Journal of Law, Economics and Organization, Oxford University Press, vol. 29(1), pages 60-77, February.
- Nathan Nunn, 2005.
"Relationship Specificity, Incomplete Contracts and the Pattern of Trade,"
- Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
- Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
- Gustavsson, Magnus & Jordahl, Henrik, 2006.
"Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others,"
Ratio Working Papers
106, The Ratio Institute.
- Gustavsson, Magnus & Jordahl, Henrik, 2008. "Inequality and trust in Sweden: Some inequalities are more harmful than others," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 348-365, February.
- Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others," Working Paper Series 673, Research Institute of Industrial Economics.
- Laura Schechter, 2005.
"Traditional trust measurement and the risk confound: An experiment in rural paraguay,"
Artefactual Field Experiments
00106, The Field Experiments Website.
- Schechter, Laura, 2007. "Traditional trust measurement and the risk confound: An experiment in rural Paraguay," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 272-292, February.
- Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
- Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
- Sylvain Chassang, 2010. "Fear of Miscoordination and the Robustness of Cooperation in Dynamic Global Games With Exit," Econometrica, Econometric Society, vol. 78(3), pages 973-1006, 05.
- Chris Bidner & Patrick Francois, 2011.
"Cultivating Trust: Norms, Institutions and the Implications of Scale,"
Royal Economic Society, vol. 121(555), pages 1097-1129, 09.
- Bidner, Chris & Francois, Patrick, 2009. "Cultivating Trust: Norms, Institutions and the Implications of Scale," Economics working papers patrick_francois-2009-66, Vancouver School of Economics, revised 02 Dec 2009.
- Carlsson, H. & Van Damme, E., 1990.
"Global Games And Equilibrium Selection,"
9052, Tilburg - Center for Economic Research.
- Carlsson, H. & van Damme, E.E.C., 1993. "Global games and equilibrium selection," Other publications TiSEM 49a54f00-dcec-4fc1-9488-4, Tilburg University, School of Economics and Management.
- Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
- Carlsson, H. & van Damme, E.E.C., 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
- Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
- Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
- Bond, Philip & Rai, Ashok S., 2009. "Borrower runs," Journal of Development Economics, Elsevier, vol. 88(2), pages 185-191, March.
- Acemoglu, Daron & Antras, Pol & Helpman, Elhanan, 2007.
"Contracts and Technology Adoption,"
3199063, Harvard University Department of Economics.
- Breuer, Janice Boucher & McDermott, John, 2012. "Culture, caution, and trust," Journal of Development Economics, Elsevier, vol. 97(1), pages 15-23.
- Chassang, Sylvain & Miquel, Gerard PadrÃ³ i, 2009. "Economic Shocks and Civil War," Quarterly Journal of Political Science, now publishers, vol. 4(3), pages 211-228, October.
- Alesina, Alberto & La Ferrara, Eliana, 2002.
"Who trusts others?,"
Journal of Public Economics,
Elsevier, vol. 85(2), pages 207-234, August.
- Tabellini, Guido, 2007.
"The Scope of Cooperation: Values and incentives,"
CEPR Discussion Papers
6534, C.E.P.R. Discussion Papers.
- Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," CESifo Working Paper Series 2236, CESifo Group Munich.
- Guido Tabellini, 2007. "The Scope of Cooperation: values and incentives," Working Papers 328, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Dora L. Costa & Matthew E. Kahn, 2003.
"Cowards and Heroes: Group Loyalty in the American Civil War,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 118(2), pages 519-548.
- Dora L. Costa & Matthew E. Kahn, 2001. "Cowards and Heroes: Group Loyalty in the American Civil War," NBER Working Papers 8627, National Bureau of Economic Research, Inc.
- repec:oup:restud:v:74:y:2007:i:3:p:791-819 is not listed on IDEAS
- Patrick Francois & Jan Zabojnik, 2005.
"Trust, Social Capital, and Economic Development,"
Journal of the European Economic Association,
MIT Press, vol. 3(1), pages 51-94, 03.
- Andrei A. Levchenko, 2004.
"Institutional Quality and International Trade,"
IMF Working Papers
04/231, International Monetary Fund.
- Andreas Bergh & Christian Bjørnskov, 2011. "Historical Trust Levels Predict the Current Size of the Welfare State," Kyklos, Wiley Blackwell, vol. 64(1), pages 1-19, 02.
When requesting a correction, please mention this item's handle: RePEc:swe:wpaper:2012-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabriele Gratton)
If references are entirely missing, you can add them using this form.