Building Social Trust: A Human Capital Approach

Fali Huang ()

Labor Economics Working Papers from East Asian Bureau of Economic Research

Abstract: Much evidence suggests individuals differ in their predisposition to cooperate, which is essentially a component of human capital. This paper examines the role of individual cooperative tendencies and their interactions with institutions in generating social trust; it also endogenizes cooperative tendencies using a human capital investment model. Multiple equilibria and inefficiencies exist due to positive externalities. An innovative finding is that, when institutions are more effective in punishing defecting behaviors, more people invest in cooperative tendencies and hence the endogenous social trust is higher, though the equilibrium cooperative tendencies are lower. This paper provides a plausible explanation for many empirical and experimental results.

Keywords: Human Capital; human capital investment model; endogenous social trust; cooperative tendencies (search for similar items in EconPapers)
JEL-codes: J24 Z13 (search for similar items in EconPapers)
Date: 2007-01
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Related works:
Journal Article: Building Social Trust: A Human-Capital Approach (2007)
Working Paper: Building Social Trust: A Human Capital Approach (2007)
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