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The Role of Social Capital in Financial DevelopmentLuigi GuisoEinaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR) Paola SapienzaNorthwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) Luigi ZingalesUniversity of Chicago Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI) American Economic Review, Vol. 94, No. 3, June 2004 Abstract: To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.
JEL Classification: Z13, G10, O16 Accepted Paper SeriesDate posted: November 4, 2004Suggested CitationContact Information
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