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A road to trust

  • Labonne, Julien
  • Chase, Robert S.
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    The authors explore the relationship between transaction costs and generalized trust. Using panel data from 2,100 households in 135 rural communities of the Philippines, the paper shows that where transaction costs are reduced (proxied by road construction), there is an increase in generalized trust. Consistent with the argument that generalized trust is built through repeated interactions, the authors find that the individuals most likely to engage in exchange exhibit an increase in trust after road construction. These results suggest that, rather than being an input to economic growth, trust might be a product of reduced transaction costs (which also favors growth).

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    File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2008/09/02/000158349_20080902104941/Rendered/PDF/WPS4706.pdf
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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4706.

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    Date of creation: 01 Sep 2008
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    Handle: RePEc:wbk:wbrwps:4706
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    1. Iris Bohnet & Steffen Huck, 2004. "Repetition and Reputation: Implications for Trust and Trustworthiness When Institutions Change," American Economic Review, American Economic Association, vol. 94(2), pages 362-366, May.
    2. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 137-158, Summer.
    3. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-38, May.
    4. Håkan J. Holm & Anders Danielson, 2005. "Tropic Trust Versus Nordic Trust: Experimental Evidence From Tanzania And Sweden," Economic Journal, Royal Economic Society, vol. 115(503), pages 505-532, 04.
    5. Mu, Ren & van de Walle, Dominique, 2007. "Rural roads and poor area development in Vietnam," Policy Research Working Paper Series 4340, The World Bank.
    6. 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.
    7. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    8. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, 09.
    9. Shahidur R. Khandker & Zaid Bakht & Gayatri B. Koolwal, 2009. "The Poverty Impact of Rural Roads: Evidence from Bangladesh," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 685-722, 07.
    10. Joel Sobel, 2002. "Can We Trust Social Capital?," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 139-154, March.
    11. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital And Predict Financial Decisions," Working Papers 909, Economic Growth Center, Yale University.
    12. Dean Karlan, 2004. "Using experimental economics to measure social capital and predict financial decisions," Artefactual Field Experiments 00074, The Field Experiments Website.
    13. Steffen Huck & Gabriele K. Ruchala & Jean-Robert Tyran, 2006. "Competition Fosters Trust," Discussion Papers 06-22, University of Copenhagen. Department of Economics.
    14. Benjamin A. Olken, 2006. "Do Television and Radio Destroy Social Capital? Evidence from Indonesian Villages," Working Papers id:642, eSocialSciences.
    15. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 811-846, August.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    16. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
    17. Miguel, Edward & Gertler, Paul & Levine, David I, 2006. "Does Industrialization Build or Destroy Social Networks?," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 287-317, January.
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