This paper presents evidence that "social capital" matters for measurable economic performance, using indicators of trust and civic norms from the World Values Surveys for a sample of 29 market economies. Memberships in formal groups-Putnam's measure of social capital-is not associated with trust or with improved economic performance. We find trust and civic norms are stronger in nations with higher and more equal incomes, with institutions that restrain predatory actions of chief executives, and with better-educated and ethnically homogeneous populations.

The impact of property rights on economic growth is examined using indicators provided by country risk evaluators to potential foreign investors. Indicators include evaluations of contract enforceability and risk of expropriation. Using these variables, property rights are found to have a greater impact on investment and growth than has previously been found for proxies such as the Gastil indices of liberties, and frequencies of revolutions, coups and political assassinations. Rates of convergence to U.S.-level incomes increase notably when these property rights variables are included in growth regressions. These results are robust to the inclusion of measures of factor accumulation and of economic policy. Copyright 1995 Blackwell Publishers Ltd..

Why does trust vary so substantially across countries? This paper presents a general equilibrium growth model in which heterogeneous agents transact and face a moral hazard problem. Agents may trust those with whom they transact, but they also have the opportunity to invest resources in verifying the truthfulness of claims made by transactors. We characterise the social, economic and institutional environments in which trust will be high, and show that low trust environments reduce the rate of investment. The predictions of the model are examined empirically for a cross‐section of countries and have substantial support in the data.

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