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How Do High and Low Levels of Social Trust Affect the Long‐run Performance of Poor Economies?

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  • Erich Gundlach
  • Gert Tinggaard Svendsen

Abstract

Poor countries with high levels of social trust are shown to experience a hump‐shaped pattern of long‐run growth. With social trust modelled as a human capital externality, a calibrated two‐sector model replicates the observed hump‐shaped growth path. The simulation results imply that a hypothetical poor economy with a high level of social trust, when beginning at a relative income level of 16 per cent, may need about 160 years to reach 50 per cent of the income level of the leading countries. For a hypothetical poor country with a low level of social trust, the process of catching up may only begin after more than 150 years of relative stagnation. © 2018 John Wiley & Sons, Ltd.

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  • Erich Gundlach & Gert Tinggaard Svendsen, 2019. "How Do High and Low Levels of Social Trust Affect the Long‐run Performance of Poor Economies?," Journal of International Development, John Wiley & Sons, Ltd., vol. 31(1), pages 3-21, January.
    • Handle: RePEc:wly:jintdv:v:31:y:2019:i:1:p:3-21
    DOI: 10.1002/jid.3388
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    Cited by:

    1. Gert Tinggaard Svendsen & N. Leila Trapp & Poul Erik Flyvholm Jørgensen & Line Skov, 2023. "The Double Molotov Cocktail of Brexit and COVID-19: Can Contact Intensity Help Explain Levels of Trust and Belief in the Future between Companies?," Business and Management Research, Business and Management Research, Sciedu Press, vol. 12(1), pages 26-35, July.
    2. Gert Tinggaard Svendsen, 2020. "Two bandits or more? The case of Viking Age England," Public Choice, Springer, vol. 182(3), pages 443-457, March.

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