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Cultivating Trust: Norms, Institutions and the Implications of Scale


  • Bidner, Chris
  • Francois, Patrick


We study the co-evolution of norms and institutions in order to better understand the conditions under which potential gains from new trading opportunities are realized. New trading opportunities are particularly vulnerable to opportunistic behavior and therefore tend to provide fertile ground for cheating. Cheating discourages production, raising equilibrium prices and therefore the return to cheating, thereby encouraging further cheating. However, such conditions also provide institutional designers with relatively high incentives to improve institutions. We show how an escape from the shadow of opportunism requires that institutional improvements out-pace the deterioration of norms. A key prediction from the model emerges: larger economies are more likely to evolve to steady states with strong honesty norms. This prediction is tested using a cross section of countries; population size is found to have a significant positive relationship with a measure of trust, even when controlling for standard determinants of trust and institutional quality.

Suggested Citation

  • 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.
  • Handle: RePEc:ubc:bricol:patrick_francois-2009-66

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    Cited by:

    1. Shingo Ishiguro, 2011. "Relationships and Growth," Discussion Papers in Economics and Business 11-31, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    2. Dimitrios Varvarigos, 2017. "Economic Growth and the Cultural Transmission of Attitudes towards Education," Discussion Papers in Economics 17/06, Department of Economics, University of Leicester.
    3. Christopher Bidner & Ken Jackson, 2011. "Trust and Vulnerability," Discussion Papers 2012-09, School of Economics, The University of New South Wales.
    4. Garofalo, Maria Rosaria, 2011. "Il volontariato può sostenere lo sviluppo? Riflessioni metodologiche per la costruzione di un frame work teorico
      [Can the voluntary sector sustain the development path of an economy? Suggestions fo
      ," MPRA Paper 40008, University Library of Munich, Germany.
    5. Nishihara, Michi & Shibata, Takashi, 2014. "Preemption, leverage, and financing constraints," Review of Financial Economics, Elsevier, vol. 23(2), pages 75-89.
    6. Anna Rubinchik & Roberto Samaniego, 2013. "Demand for contract enforcement in a barter environment," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(1), pages 73-97, June.
    7. Davide Ticchi & Thierry Verdier & Andrea Vindigni, 2013. "Democracy, Dictatorship and the Cultural Transmission of Political Values," Carlo Alberto Notebooks 300, Collegio Carlo Alberto.
    8. Gershman, Boris, 2016. "Witchcraft beliefs and the erosion of social capital: Evidence from Sub-Saharan Africa and beyond," Journal of Development Economics, Elsevier, vol. 120(C), pages 182-208.
    9. Yamamura, Eiji, 2013. "Atomic bombs and the long-run effect on trust: Experiences in Hiroshima and Nagasaki," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 46(C), pages 17-24.
    10. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120 Elsevier.
    11. Pierre André & Paul Maarek, 2017. "Education, social capital and political participation Evidence from school construction in Malian villages," THEMA Working Papers 2017-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    12. M. Niaz Asadullah, 2017. "Who Trusts Others? Community and Individual Determinants of Social Capital in a Low-Income Country," Cambridge Journal of Economics, Oxford University Press, vol. 41(2), pages 515-544.
    13. Alberto Bisin & Thierry Verdier, 2010. "The Economics of Cultural Transmission and Socialization," NBER Working Papers 16512, National Bureau of Economic Research, Inc.
    14. Jahnke, Björn & Fochmann, Martin & Wagener, Andreas, 2016. "Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment," Annual Conference 2016 (Augsburg): Demographic Change 145646, Verein für Socialpolitik / German Economic Association.
    15. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    16. Bisin, Alberto & Verdier, Thierry, 2017. "On the Joint Evolution of Culture and Institutions," CEPR Discussion Papers 12000, C.E.P.R. Discussion Papers.
    17. Arbel, Yuval & Bar-El, Ronen & Siniver, Erez & Tobol, Yossi, 2014. "The Effect of Behavioral Codes and Gender on Honesty," IZA Discussion Papers 7946, Institute for the Study of Labor (IZA).
    18. repec:eee:jcecon:v:45:y:2017:i:4:p:865-888 is not listed on IDEAS
    19. Bogliacino, Francesco & Grimalda, Gianluca & Jimenez, Laura, 2017. "Consultative Democracy & Trust," MPRA Paper 82138, University Library of Munich, Germany.
    20. Ngendakuriyo, Fabien & Zaccour, Georges, 2013. "Fighting corruption: To precommit or not?," Economics Letters, Elsevier, vol. 120(2), pages 149-154.
    21. Klasing, Mariko J., 2014. "Cultural change, risk-taking behavior and implications for economic development," Journal of Development Economics, Elsevier, vol. 110(C), pages 158-169.
    22. Arbel, Yuval & Bar-El, Ronen & Siniver, Erez & Tobol, Yossef, 2014. "Roll a die and tell a lie – What affects honesty?," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 153-172.

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    Trust; Institutions; Population Size;

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