Title

Building Social Trust: A Human Capital Approach

Publication Type

Journal Article

Publication Date

12-2007

Abstract

Much evidence suggests individuals differ in their predisposition to cooperate, which is essentially a component of human capital. This paper examines the role of individual cooperative tendencies and their interactions with institutions in generating social trust; it also endogenizes cooperative tendencies using a human-capital investment model. Multiple equilibria and inefficiencies exist due to positive externalities. An innovative finding is that, when institutions are more effective in punishing defecting behaviors, more people invest in cooperative tendencies and hence the endogenous social trust is higher, though the equilibrium cooperative tendencies are lower. This paper provides a plausible explanation for many empirical and experimental results.

Discipline

Labor Economics

Research Areas

Applied Microeconomics

Publication

Journal of Institutional and Theoretical Economics

Volume

163

Issue

4

First Page

552

Last Page

573

ISSN

1614-0559

Identifier

10.1628/093245607783242981

Publisher

Mohr Siebeck

Additional URL

http://dx.doi.org/10.1628/093245607783242981

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