Trust and Growth
Why does trust vary so substantially across countries? How does trust affect growth? This paper presents a general equilibrium growth model in which heterogeneous agents transact and face a moral hazard problem. Agents in this world may trust those with whom they transact, but they also have opportunity to invest resources in verifying the truthfulness of claims made by transactors. We characterize the social, economic and institutional environment in which trust will be high, and show that low trust environments reduce the rate of investment and thus the economy’s growth rate.
Por Paul J. Zak y Stephen Knack
