Social Trust and Economic Growth

Abstract

This chapter provides a selective survey of the literature on the association between social trust and economic growth. The chapter is divided into two main sections. The first section outlines the main theoretical arguments for how social trust could affect the long-run growth rate and economic performance of the economy. These theoretical mechanisms can both be direct or work indirectly through affecting institutions, factor accumulation and the elasticity of substitution. An overview of a set of relevant theoretical mechanisms also reveals that some only affect growth under specific conditions. The second section is devoted to reviewing the evidence of an empirical association. While the literature clearly supports a causal effect of trust on growth, the empirical section as well as the conclusions suggest a number of ways in which the field may move forward.

Keywords: O10, N40, Z13

JEL Classification: Social trust, economic growth, economic development