Trusting Only Whom You Know, Knowing Only Whom You Trust: The Joint Impact of Social Capital and Trust on Individuals’ Economic Performance and Happiness in CEE Countries

National Bank of Poland Working Paper No. 94

36 Pages Posted: 20 Sep 2011 Last revised: 8 Jul 2016

See all articles by Katarzyna Growiec

Katarzyna Growiec

University of Social Sciences and Humanities

Jakub Growiec

National Bank of Poland; Warsaw School of Economics (SGH)

Date Written: September 1, 2011

Abstract

This paper demonstrates that bridging and bonding social capital as well as social trust interdependently affect individuals’ earnings and happiness. Based on cross-sectional World Values Survey 2000 data on individuals from eight Central and Eastern European countries (CEECs), we provide evidence that majority of citizens of these countries have likely fallen in a 'low trust trap' where deficits of bridging social capital and trust reinforce each other in lowering individuals’ incomes and happiness. Apart from gradual modernization and economic growth, also increases in labor market participation are identified as a potential way out of this 'trap', because employed people in CEECs tend to have statistically significantly more bridging social capital and more trust. While assessing robustness of our empirical results, we have found a high risk of regressor endogeneity and omitted variables bias, generally overlooked in earlier studies. These issues are carefully addressed in the current contribution.

Keywords: bridging social capital, bonding social capital, social trust, CEE countries

JEL Classification: D10, J20

Suggested Citation

Growiec, Katarzyna and Growiec, Jakub, Trusting Only Whom You Know, Knowing Only Whom You Trust: The Joint Impact of Social Capital and Trust on Individuals’ Economic Performance and Happiness in CEE Countries (September 1, 2011). National Bank of Poland Working Paper No. 94. Available at SSRN: https://ssrn.com/abstract=1930845 or http://dx.doi.org/10.2139/ssrn.1930845

Katarzyna Growiec (Contact Author)

University of Social Sciences and Humanities ( email )

Warsaw
Poland

Jakub Growiec

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH)

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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