Social Interactions, the Evolution of Trust, and Economic Growth

Dimitrios Varvarigos () and Guangyi Xin ()

No 15/05, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

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.

Keywords: Trust; Cultural Externalities; Economic Growth (search for similar items in EconPapers)
JEL-codes: O41 Z13 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-evo, nep-fdg, nep-gro and nep-soc
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Citations: View citations in EconPapers (5)

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