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How Do High and Low Levels of Social Trust Affect the Long‐run Performance of Poor Economies?
Author(s) -
Gundlach Erich,
Svendsen Gert Tinggaard
Publication year - 2019
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3388
Subject(s) - externality , social capital , affect (linguistics) , economics , social trust , human capital , demographic economics , economic growth , microeconomics , sociology , political science , law , communication
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.