Trust, Social Capital, and Economic Development

Abstract

Many argue that elements of a society's norms, culture, or social capital are central to understanding its development. However, these notions have been difficult to capture in economic models. Here we explore a possible role for “trustworthiness” as corresponding to social capital. Individuals are trustworthy when they perform in accordance with promises, even if this does not maximise their payoffs. The usual focus on incentive structures in motivating behaviour plays no role here. Instead, we emphasise more deep‐seated modes of behaviour and consider trustworthy agents being socialised to act as they do. To model this socialisation, we borrow from a process of preference evolution pioneered by Bisin and Verdier (2001). The model developed endogenously accounts for social capital and explores its role in the process of economic development. It captures in a simple, formal way the interaction between social capital and the economy's productive processes. The results obtained caution against rapid reform and provide an explanation for why late‐developing countries may not easily be able to transplant the modes of production that have proved useful in the West. (JEL: O1, O3, O4, Z1)

Mind the Gap! Social Capital, East and West

“…Glaeser et al (2000) provide a fine combination of experimental and field data to measure both concepts of trust and trustworthiness. For an interesting theoretical study of trustworthiness, as corresponding to a non-incentive based type of social capital, see Francois and Zabojnik (2005 Given that the vast majority of the new EU members are post-communist countries, this observation seems to confirm the assertion of Svendsen (2000, 2001) and Adam et al (2004) that communism destroyed social capital by discouraging social interactions outside one's immediate network of friends and family. Second, there is nonetheless a considerable degree of variation within both groups of countries -some new member countries display high endowments of social capital whereas some old member countries fare rather poorly.…”

Beyond the Employment Agency: The Effect of Social Capital on the Duration of Unemployment

“…Fukuyama specifically contrasts countries "with healthy endowments of social capital" to countries with less social capital. Similarly, other authors demonstrate the relationship between social capital and economic development (e.g., Woolcook, 1998;Francois and Zabojnik, 2005), as well as social capital and economic performance (e.g., Solow, 2000;Westlund and Adam, 2010). Moreover, further studies are concerned with the relation between social capital and growth (e.g., Helliwell and Putnam, 1995;Yli-Renko et al, 2002;Routledge and von Amsberg, 2003;Iyer et al, 2005), income (e.g., Narayan and Pritchett, 1999;Yamamura, 2010), and also financial issues (e.g., Gomez and Santor, 2001;Guiso et al, 2004).…”

Political regime change and cultural transmission of secularism

“…Tabellini (2008) addresses the cultural evolution of the individual values that sustain cooperation and studies the interaction between values and the external institutional environment. Francois and Zabojnik (2005) develop a model in which the social capital captured as the trustworthiness of the members of a society coevolves with society's economic development. They argue that problems are associated with the rapid introduction of modern production modes in less developed countries.…”