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

Erich Gundlach () and Gert Tinggaard 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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https://doi.org/10.1002/jid.3388

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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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