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Trust, Social Capital and Economic Development

Author

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  • Francois, P.

    (Tilburg University, Center For Economic Research)

  • Zabojnik, J.

Abstract

Many argue that elements of a society's norms, culture, or social capital are central to under-standing its development. However, these notions have been difficult to capture in economic models. Here we explore a possible role for "trustworthiness" as corresponding to social capital. Individuals are trustworthy when they perform in accordance with promises, even if this does not maximise their payoffs. The usual focus on incentive structures in motivating behaviour plays no role here. Instead, we emphasise more deep-seated modes of behaviour and consider trustworthy agents being socialised to act as they do. To model this socialisation, we borrow from a process of preference evolution pioneered by Bisin and Verdier (2001). The model developed endogenously accounts for social capital and explores its role in the process of eco-nomic development. It captures in a simple, formal way the interaction between social capital and the economy's productive processes. The results obtained caution against rapid reform and provide an explanation for why late-developing countries may not easily be able to transplant the modes of production that have proved useful in the West. (JEL: O1, O3, O4, Z1) Copyright (c) 2005 by the European Economic Association.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Francois, P. & Zabojnik, J., 2003. "Trust, Social Capital and Economic Development," Discussion Paper 2003-116, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:0e95c1f5-f5fa-4a46-a50e-a675fb98fee0
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    References listed on IDEAS

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    More about this item

    Keywords

    technological change; public finance; economic development;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Z1 - Other Special Topics - - Cultural Economics

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