Trust, Social Capital and Economic Development

P. Francois, J. Zabojnik

Research output: Working paperDiscussion paperOther research output

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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 argue that trustworthiness is the economically relevant component of a society s culture and hence comprises its social capital.Individuals are trustworthy when they perform actions they have promised, even if these do not maximize their payoffs.The usual focus on incentive structures in motivating behaviour plays no role here.Instead, we emphasize more deep-seated modes of behaviour and consider that trustworthy agents are socialized to act as they do.To model this socialization, we borrow from a relatively new 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 process.The results obtained caution against rapid reform, provide an explanation for why late developing countries cannot easily transplant the modes of production that have proved useful in the West, and suggest an explanation for the pattern of reform experiences in ex-communist countries.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages42
Volume2003-116
Publication statusPublished - 2003

Publication series

NameCentER Discussion Paper
Volume2003-116

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Economic development
Social capital
Incentive structure
Developing countries
Evolution of preferences
Socialization
Trustworthiness
Interaction

Keywords

  • technological change
  • public finance
  • economic development

Cite this

Francois, P., & Zabojnik, J. (2003). Trust, Social Capital and Economic Development. (CentER Discussion Paper; Vol. 2003-116). Tilburg: Macroeconomics.
Francois, P. ; Zabojnik, J. / Trust, Social Capital and Economic Development. Tilburg : Macroeconomics, 2003. (CentER Discussion Paper).
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Francois, P & Zabojnik, J 2003 'Trust, Social Capital and Economic Development' CentER Discussion Paper, vol. 2003-116, Macroeconomics, Tilburg.

Trust, Social Capital and Economic Development. / Francois, P.; Zabojnik, J.

Tilburg : Macroeconomics, 2003. (CentER Discussion Paper; Vol. 2003-116).

Research output: Working paperDiscussion paperOther research output

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AU - Francois, P.

AU - Zabojnik, J.

N1 - Pagination: 42

PY - 2003

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AB - 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 argue that trustworthiness is the economically relevant component of a society s culture and hence comprises its social capital.Individuals are trustworthy when they perform actions they have promised, even if these do not maximize their payoffs.The usual focus on incentive structures in motivating behaviour plays no role here.Instead, we emphasize more deep-seated modes of behaviour and consider that trustworthy agents are socialized to act as they do.To model this socialization, we borrow from a relatively new 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 process.The results obtained caution against rapid reform, provide an explanation for why late developing countries cannot easily transplant the modes of production that have proved useful in the West, and suggest an explanation for the pattern of reform experiences in ex-communist countries.

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KW - public finance

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Francois P, Zabojnik J. Trust, Social Capital and Economic Development. Tilburg: Macroeconomics. 2003. (CentER Discussion Paper).