Does Social Capital Have an Economic Payoff? A Cross-Country Investigation

Abstract

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.

Building Social Trust: A Human-Capital Approach

“…For example, this paper illustrates the importance of strategic interdependence among individual decisions in cultivating cooperative tendencies, which sheds new light on cross-sectional di¤erences in social trust. Though the crowding in and crowding out e¤ects of legal institutions on intrinsic motivation are already known (Huck [1998], Bar-Gill and Fershtman [2005], Bohnet, Frey, and Huck [2001], Guth and Ockenfels [2005]), this paper's …nding that a more e¤ective legal system may induce more people to invest in lower cooperative tendencies is brand new; this result is also consistent with the evidence that nations with better legal institutions tend to have higher social trust levels based on the World Value Surveys (Knack and Keefer [1997]). …”

“…It may shed light on the contradictory social trust ranking across countries. For example, T RU ST in the UK (44.4) is much higher than Italy (26.3) (Knack and Keefer [1997]), but UK subjects "free-rode to a much greater extent" than Italians in a public goods experiment (Burlando and Hey [1997]). A similar comparison is the US (T RU ST = 45:4) vs. Germany (T RU ST = 29:8) based on survey results, whereas US subjects free-rode more than Germans in experiments (Weimann [1994]).…”

“…In recent years social trust has attracted the attention of many economists as well as other social scientists. 1 For example, several empirical studies show that the average trust level in a society is signi…cantly associated with economic growth (Knack and Keefer [1997]) and has large positive e¤ects on the performance of various organizations (La Porta et al [1997]). At the same time, many experimental economists have documented substantial amounts of trust in various games (see Palfrey and Prisbrey [1997], Berg, Dickhaut, and McCabe [1995], and Glaeser et al [2000] among others).…”

Trust at zero acquaintance: More a matter of respect than expectation of reward.

“…Indeed, trust has been called a core social motive (Fiske, 2003). Nations displaying more trust among strangers tend to have higher rates of economic growth (Fetchenhauer & Van der Vegt, 2001;Knack & Keefer, 1997;Putnam, 1993) and happiness (Oishi, Kesebir, & Diener, 2011).…”

Age and the Development of Trust and Reciprocity

“…It is obvious that many economic interactions are characterized by an exchange of favors or goods and services, where the quality or quantity of the exchange cannot be enforced strictly. Without mutual trust and the social norm of reciprocal behavior, most of these exchanges would not take place, much to the detriment of the involved parties in particular and of society in general (Knack and Keefer, 1997;Zak and Knack, 2001). …”