How Do High and Low Levels of Social Trust Affect the Long‐run Performance of Poor Economies?

Erich Gundlach and Gert Svendsen

Journal of International Development, 2019, vol. 31, issue 1, 3-21

Abstract: Poor countries with high levels of social trust are shown to experience a hump‐shaped pattern of long‐run growth. With social trust modelled as a human capital externality, a calibrated two‐sector model replicates the observed hump‐shaped growth path. The simulation results imply that a hypothetical poor economy with a high level of social trust, when beginning at a relative income level of 16 per cent, may need about 160 years to reach 50 per cent of the income level of the leading countries. For a hypothetical poor country with a low level of social trust, the process of catching up may only begin after more than 150 years of relative stagnation. © 2018 John Wiley & Sons, Ltd.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:31:y:2019:i:1:p:3-21

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