TRUST, LANDSCAPE, AND ECONOMIC DEVELOPMENT

Sherif Khalifa

Journal of Economic Development, 2016, vol. 41, issue 1, 19-32

Abstract: This paper examines the effect of trust on economic development. The key difficulty in estimating a causal effect of trust on economic development, is that it is endogenous to economic development. Therefore, to identify a causal effect from a cultural variable such as trust to economic development, we have to find some exogenous source of variation in trust. This paper estimates the effect of trust on economic development using new instrumental variables. The instruments used for trust are the mean elevation and the terrain ruggedness. In this context, the paper examines the relationship between trust and the logarithm of real Gross Domestic Product per capita. The paper focuses on trust in people from another nationality, trust in people from another religion, trust in people you know personally, trust in people you meet for the first time, trust in your family, and trust in your neighborhood. The results show that these variables have a statistically significant positive association with economic development. These results are robust after the inclusion of control variables such as the fractionalization indicator, continental dummies, and indicators for the legal origin and the colonial origin. The paper also conducts two stage least squares regressions. The second stage is a regression of the logarithm of real Gross Domestic Product per capita on each of the trust variables. In the first stage, the geographic factors that statistically explain trust, such as elevation and terrain ruggedness, are used as instrumental variables. The results of the empirical estimation show that trust, instrumented by these geographic variables, explain cross country variations in economic development.

Keywords: Geography; Trust; Economic Development (search for similar items in EconPapers)
JEL-codes: N1 O1 Z1 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.jed.or.kr/full-text/41-1/2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jed:journl:v:41:y:2016:i:1:p:19-32

Access Statistics for this article

Journal of Economic Development is currently edited by Sung Y. Park

More articles in Journal of Economic Development from Chung-Ang Unviersity, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sung Y. Park ().