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Building Social Trust : A Human Capital Approach

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  • Fali Huang

    (SMU)

Abstract

Much evidence suggests individuals differ in their predisposition to cooperate, which is essentially a component of human capital. This paper examines the role of individual cooperative tendencies and their interactions with institutions in generating social trust; it also endogenizes cooperative tendencies using a human capital investment model. Multiple equilibria and inefficiencies exist due to positive externalities. An innovative finding is that, when institutions are more effective in punishing defecting behaviors, more people invest in cooperative tendencies and hence the endogenous social trust is higher, though the equilibrium cooperative tendencies are lower. This paper provides a plausible explanation for many empirical and experimental results.

Suggested Citation

  • Fali Huang, 2007. "Building Social Trust : A Human Capital Approach," Labor Economics Working Papers 22447, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:laborw:22447
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    More about this item

    Keywords

    Human Capital; human capital investment model; endogenous social trust; cooperative tendencies;
    All these keywords.

    JEL classification:

    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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