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Social Interactions, the Evolution of Trust, and Economic Growth

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  • Dimitrios Varvarigos
  • Guangyi Xin

Abstract

We present a model where the dynamics of trust and the process of capital accumulation are jointly determined. Trust evolves intergenerationally, as the process of social interactions with people from different backgrounds creates experiences and forms opinions that are bequeathed to the next generation, thus shaping their level of trust. The provision of public goods and services is also a supporting factor towards the formation of trust. A key result is the possibility of social segregation if the level of trust is below a critical threshold. As a result, long-run equilibria are path-dependent. Both the current level of trust and the current stock of capital are important in determining the economy’s long-term prospects.

Suggested Citation

  • Dimitrios Varvarigos & Guangyi Xin, 2015. "Social Interactions, the Evolution of Trust, and Economic Growth," Discussion Papers in Economics 15/05, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:15/05
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    References listed on IDEAS

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    Cited by:

    1. Itaya, Jun-ichi & Tsoukis, Chris, 2017. "Social Capital and the Status Externality," Discussion paper series. A 318, Graduate School of Economics and Business Administration, Hokkaido University.
    2. Ankush Goyal & Rajender Kumar, 2022. "Does Social Welfare Programmes Influence Households Trust in Local Administration and Their Political Participation? Evidence from the MGNREG Scheme in India," Indian Journal of Human Development, , vol. 16(3), pages 602-617, December.
    3. Jun‐ichi Itaya & Christopher Tsoukis, 2022. "Social capital and the status externality," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(2), pages 154-181, June.
    4. Mwoya Byaro & Abel Kinyondo, 2020. "Citizens' Trust in Government and Their Greater Willingness to Pay Taxes in Tanzania: A Case Study of Mtwara, Lindi, and Dar es Salaam Regions," Poverty & Public Policy, John Wiley & Sons, vol. 12(1), pages 73-83, March.

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    More about this item

    Keywords

    Trust; Cultural Externalities; Economic Growth;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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