Trust and delegation: Theory and evidence

Nurullah Gur and Christian Bjørnskov

Journal of Comparative Economics, 2017, vol. 45, issue 3, 644-657

Abstract: Social trust is associated with good economic performance, but little is known about the transmission mechanisms connecting trust and performance. We explore the effect of trust on delegation decisions. In a theoretical framework, we note that delegation is a low-cost option when management decisions can be implemented without monitoring. This option is, however, risky and more likely to be profitable in higher-trust environments. In a set of cross-country regressions, we show a strong association between trust and delegation, which is increasing in economic sophistication.

Keywords: Social trust; Economic development; Delegation (search for similar items in EconPapers)
JEL-codes: L22 O40 Z13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:45:y:2017:i:3:p:644-657

DOI: 10.1016/j.jce.2016.02.002

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