SCIENCE@home

TRUST A ND G ROWTH

Paul J. Zak,Stephen F. Knack

Published 2001 in Unknown venue

ABSTRACT

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. If a covenant be made, wherein neither of the parties perform presently, but trust one another ... he that performeth first, has no assurance the other will perform after; because the bonds of words are too weak to bridle men’s ambition, avarice, anger, and other Passions, without the fear of some coercive Power ... Thomas Hobbes, Leviathan, 1651

PUBLICATION RECORD

CITATION MAP

EXTRACTION MAP

CLAIMS

  • No claims are published for this paper.

CONCEPTS

  • No concepts are published for this paper.

REFERENCES

Showing 1-60 of 60 references · Page 1 of 1

CITED BY

Showing 1-100 of 2948 citing papers · Page 1 of 30

123430
Next