To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam, 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that these priors are reflected in the novels originated in different parts of the country.
More papers in Economics Working Papers from European University Institute Address: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy Contact information at EDIRC. Series data maintained by Marcia Gastaldo ().