Can Trust Explain Social Capital Effect on Property Rights and Growth?

Hall, Stephen G and Ahmad, Mahyudin (2013): Can Trust Explain Social Capital Effect on Property Rights and Growth? Forthcoming in: Procedia Economics and Finance (October 2013)

Abstract

The consensus in growth literature has recognized the significant effects of institutions (including social capital and political institutions) towards economic growth. Utilizing the World Value Survey (WVS)’s trust variable that has often been used to represent social capital, and employing panel data technique which hitherto has been very limited in social capital studies, this study shows that WVS’ trust data suffer severe missing observation problem and the panel fixed effect estimation using such data produce highly unrobust results. Future research in social capital therefore needs to expand their measure of social capital beyond the WVS trust indicator. The results also indicate that political institutions effect on growth could possibly occur indirectly via property rights channel.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trust; Social Capital; Property Rights; Economic Growth
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification

References

Acemoglu, D. and Johnson S. (2005). “Unbundling Institutions”. Journal of Political Economy 113 (5), pp. 949-995.

Acemoglu, D., Johnson, S. and Robinson J.A. (2001). “The Colonial Origins of Comparative Development: An Empirical Investigation”. American Economic Review, 91(5), pp. 1369 – 1401.

Acemoglu, D., Johnson, S. and Robinson, J. A. (2005). “Institutions as the Fundamental Cause of Long-Run Growth”, in: Philippe Aghion and Steven Durlauf (ed.), Handbook of Economic Growth, Edition 1, Volume 1, Chapter 6, pp. 385-472 Elsevier, North Holland.

Ahmad, M., and Hall, S.G. (2012). Institutions-growth spatial dependence: An empirical test, Procedia - Social and Behavioral Sciences, Vol. 65, pp. 925-930.

Baliamoune-Lutz, M. (2011), “Trust-based social capital, institutions, and development”. Journal of Socio-Economics, Volume 40, Issue 4, August 2011, pp. 335-346.

Barro, R. J. and Lee, J. W. (2010). “A New Data Set of Educational Attainment in the World, 1950-2010”. National Bureau of Economic Research Working Paper Series, No. 15902.

Berggren, N., Elinder, M. and Jordahl, H. (2008). “Trust and growth: A shaky relationship”, Empirical Economics, 35(2), pp. 251–274.

Beugelsdijk, S., and van Schaik, T. (2005). “Social capital and growth in European regions: an empirical test”. European Journal of Political Economy, 21 (2005), pp. 301–324.

Beugelsdijk, S., De Groot, H. L. F., and Van Schaik, A.B.T.M. (2004). “Trust and economic growth: a robustness test”. Oxford Economic Papers, 56 (2004), pp. 118–134.

Bjørnskov, C. (2006). “How Does Social Trust Affect Economic Growth?,” Working Papers 06-2, University of Aarhus, Aarhus School of Business, Department of Economics.

Coleman, J.S. (1988). “Social Capital in the Creation of Human Capital,” American Journal of Sociology 94, 95-120.

Coleman, J. S., (1990), “The Foundations of Social Theory”, Harvard University Press, Cambridge, MA, USA.

Dincer, O. and Uslaner, E. (2010). "Trust and growth," Public Choice, Springer, vol. 142(1), pp. 59-67.

Easterly, W. (2006). “Social Cohesion, Institutions and Growth”. Center for Global Development, Working Paper No. 94.

Fukuyama, F. (1999). “The Great Disruption”, Simon and Schuster, New York (1999).

Glaeser, E. L., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2004). “Do Institutions Cause Growth?” Journal of Economic Growth, 9, pp. 271-303.

Hall, R. E. and Jones, C. I. (1999). “Why Do Some Countries Produce So Much More Output per Worker Than Others?” The Quarterly Journal of Economics, 114, pp. 83-116.

Helliwell, J. F. (1996). “Economic Growth and Social Capital in Asia”, Cambridge, MA: NBER Working Paper 5470, National Bureau of Economic Research.

Knack, S. and Keefer, P. (1997). “Does Social Capital Have an Economic Payoff? A Cross-Country Investigation”. Quarterly Journal of Economics, November, 112(4), pp. 1251-1288.

Knowles, S., (2006). “Is Social Capital Part of the Institutions Continuum and is it a Deep Determinant of Development?,” Working Papers RP2006/25, World Institute for Development Economic Research (UNU-WIDER).

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R. W. (1999). “Trust in Large Organizations”, in: Partha Dasgupta and Ismail Seregaldin (eds.), Social Capital – A Multifaceted Perspective. Washington D.C.: The World Bank: pp. 310–324.

Mankiw, G. N., Romer, D. and Weil, D.N. (1992). “A Contribution to the Empirics of Economic Growth”. The Quarterly Journal of Economics, Vol. 107, No. 2. pp. 407-437.

Mauro, P. (1995). “Corruption and Growth”. Quarterly Journal of Economics, 107, pp. 407-437.

Neira, I., Vászquez, E. and Portela, M. (2009) “An empirical analysis of social capital and economic growth in Europe (1980–2000)”, Social Indicators Research, 92(1), pp. 111–129.

North, D. C. (1990), “Institutions, Institutional Change and Economic Performances”, Cambridge University Press, Cambridge.

North D. C. (2005), “Understanding the Process of Economic Change”, Princeton University Press, Princeton. Penn World Table 6.3 (2009)

Pérez-García, Martinez, F. S., L., Montesinos Santalucia, V. and Fernandez de Guevara Radoselovics, J. (2006). “Measurement of Social Capital and Growth: An Economic Methodology”. Fundacion BBVA, Documentos de Trabajo 4/2006.

Putnam, R. D. (1993). “Making Democracy Work” (with Robert Leonard and Raffaella Y. Nanetti), Princeton University Press, Princeton, NJ (1993).

Raiser, M. (2008). “Social capital and economic performance in transition economies, in: D. Castiglione, J.W. v Deth and G. Wolleb (Eds) The Handbook of Social Capital, pp. 491–519, Oxford: Oxford University Press.

Rodrik, D. (2005). “Growth Strategies,” Handbook of Economic Growth, 1(1), 967-1014.

Rodrik, D. (2008). "Second-Best Institutions," American Economic Review, American Economic Association, vol. 98(2), pp. 100-104, May. Also available as Rodrik, D. (2008). "Second-Best Institutions," CEPR Discussion Papers 6764, C.E.P.R. Discussion Papers.

Rodrik D. and Rosenzweig M. (2009), “Linking development policy and development research: an introduction”, in Rodrik D. and Rosenzweig M. (ed.), Handbook of Development Economics, vol. 5, North Holland.

Rodrik, D., Subramaniam, A., and Trebbi, F. (2004). “Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development”. Journal of Economic Growth, 9(2), pp. 131-165.

Roth, F. (2009). “Does Too Much Trust Hamper Economic Growth?”. Kyklos, Vol. 62, No. 1, pp. 103-128, February 2009.

Serageldin, I. (1999), Foreword. In: Knack, Stephen, “Social Capital, Growth and Poverty: A Survey of Cross-Country Evidence”, Social Capital Initiative Working Paper 7, pp. iii.

Stiglitz J. E. (2001b), “Keynote Adress: Challenge in the analysis of the role on institutions in economic development”, in Kodendorfer-Lucius G., and Pleskovic B. (eds.), The Institutional Foundation of a market economy, Villa Borsig Workshop Series 2000, German Foundation for (DSE), pp. 15-20.

Tabellini, G. (2010). “Culture and Institutions: Economic Development in the Regions of Europe,” Journal of the European Economic Association, 8(4), pp. 677-716.

Westlund, H., and Adam, F. (2010). “Social capital and Economic Performance: A Meta-analysis of 65 studies”, European Planning Studies, 18 (6), pp. 893-919.

Whiteley, P. F. (2000). “Economic Growth and Social Capital”, Political Studies. 48, pp. 443–466.

Williamson, C. R., and Kerekes, C. B (2010). “Securing Private Property: Formal versus Informal Institutions,” Journal of Law and Economics, forthcoming. Retrieved from http://www.claudiawilliamson.com/Claudias_Site/Research_files/Securing_Private_Property_Williamson.pdf.

World Values Survey, The (2009). “World Values Survey 1981-2008 Official Aggregate v.20090901”, The World Values Survey Association (www.worldvaluessurvey.org). Aggregate File Producer: ASEP/JDS, Madrid.

World Bank, The (2009), World Development Indicators (Edition: various). ESDS International, University of Manchester.

Zak P. J. and Knack, S. (2001), “Trust and Growth”. Economic Journal, 111 (2001), pp. 295–321.