Does social capital prevent macroeconomic instability?

Marc Sangnier

PSE Working Papers from PSE (Ecole normale supérieure)

Abstract: This paper investigates the relationship between social capital, measured as trust, and macroeconomic instability. It is shown in a cross section of countries that higher trust is associated with lower macroeconomic instability. We use the inherited trust of Americans as an instrumental variable of trust in their origin country to overcome all potential reverse causality concerns. Trust is shown to be an important determinant of macroeconomic stability.

New Economics Papers: this item is included in nep-soc
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:pse:psecon:2009-40

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