The Role of Social Capital in Financial Development

Posted: 4 Nov 2004

See all articles by Luigi Guiso

Luigi Guiso

Einaudi Institute for Economics and Finance (EIEF); Einaudi Institute for Economics and Finance

Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

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

Suggested Citation

Guiso, Luigi and Guiso, Luigi and Sapienza, Paola and Zingales, Luigi, The Role of Social Capital in Financial Development. American Economic Review, Vol. 94, No. 3, June 2004, Available at SSRN: https://ssrn.com/abstract=613986

Luigi Guiso (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

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Einaudi Institute for Economics and Finance ( email )

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rome, 00187
Italy

Paola Sapienza

Northwestern University - Kellogg School of Management - Department of Finance ( email )

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United States
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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Luigi Zingales

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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United States

Centre for Economic Policy Research (CEPR)

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United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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Belgium

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