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SOCIAL CAPITAL, TRUST, AND MULTIPLE EQUILIBRIA IN ECONOMIC PERFORMANCE

Published online by Cambridge University Press:  14 September 2012

Katarzyna Growiec  and
Jakub Growiec
Katarzyna Growiec
Affiliation:
Warsaw School of Social Sciences and Humanities
Jakub Growiec*
Affiliation:
Warsaw School of Economics and National Bank of Poland
*
Address correspondence to: Jakub Growiec, Instytut Ekonometrii, Szkoła Główna Handlowa, al. Niepodległości 162, 02-554 Warszawa, Poland; e-mail: jakub.growiec@sgh.waw.pl.
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Abstract

We propose a novel mechanism giving rise to poverty traps and multiple equilibria in economic performance. It is a potentially important source of persistent underdevelopment across countries and regions. At the core of this mechanism, bridging social capital and social trust feed back on each other, interdependently affecting individuals' earnings and subjective well-being. High trust and abundant bridging social capital reinforce each other, leading to a “high” equilibrium where both these variables take persistently high values, and earnings and well-being are high as well, whereas low trust and lack of bridging social capital create a vicious circle, leading to a “low trust trap” where all these variables are persistently low. The workings of our theoretical model are in agreement with a wide range of findings from the contemporary literature in sociology and social psychology.

Keywords

Bridging Social CapitalSocial TrustMultiple EquilibriaPoverty Trap

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Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 2 , March 2014 , pp. 282 - 315
Copyright
Copyright © Cambridge University Press 2012 

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