Trust in Transition: Cross-country and Firm Evidence
This paper uses data from a large survey of firms across 26 transition countries to examine the determinants of trust in the transition process. We first introduce a new measure of trust between firms: the level of prepayment demanded by suppliers from their customers in advance of delivery. Using this new measure, we confirm earlier findings that trust is higher where firms have confidence in third party enforcement through the legal system. However, the fairness and honesty of the courts are more important determinants of inter-firm trust than the courts’ efficiency or ability to enforce decisions. We then examine the role of business networks in building trust and find that networks based around personal ties – family and friends – and business associations actively promote the development of trust, while business networks based on enterprise insiders and government agencies do not. Finally, we find that country-level effects are significantly more important determinants of inter-firm trust than firm-level effects.
|Date of creation:||23 Jan 2004|
|Date of revision:|
|Note:||Type of Document - pdf; prepared on Win2000; pages: 22; figures: 1|
|Contact details of provider:|| Web page: http://126.96.36.199|
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.:
- Kornai, Janos, 1993. "The Evolution of Financial Discipline under the Postsocialist System," Kyklos, Wiley Blackwell, vol. 46(3), pages 315-36.
- 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.
- Olivier Blanchard & Michael Kremer, 1997.
William Davidson Institute Working Papers Series
38, William Davidson Institute at the University of Michigan.
- John McMillan & Christopher Woodruff, 1999.
"Interfirm Relationships And Informal Credit In Vietnam,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(4), pages 1285-1320, November.
- McMillan, John & Woodruff, Christopher, 1998. "Inter-Firm Relationships and Informal Credit in Vietnam," CEPR Discussion Papers 2036, C.E.P.R. Discussion Papers.
- John McMillan & Christopher Woodruff, 1998. "Interfirm Relationships and Informal Credit in Vietnam," William Davidson Institute Working Papers Series 132, William Davidson Institute at the University of Michigan.
- Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999.
"Contract Enforcement in Transition,"
CEPR Discussion Papers
2081, C.E.P.R. Discussion Papers.
- Edward L. Glaeser & Jose Scheinkman & Andrei Shleifer, 2002.
"The Injustice of Inequality,"
Harvard Institute of Economic Research Working Papers
1967, Harvard - Institute of Economic Research.
- Simon Johnson & John McMillan, 2002.
"Courts and Relational Contracts,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 18(1), pages 221-277, April.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpot:0401007. 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: (EconWPA)
If references are entirely missing, you can add them using this form.