Trust and Social Collateral
Dean Karlan (),
Markus Mobius (),
Tanya Rosenblat and
Staff General Research Papers Archive from Iowa State University, Department of Economics
This paper builds a theory of trust based on informal contract enforcement in social networks. In our model, network connections between individuals can be used as social collateral to secure informal borrowing. We deâ€¦ne network-based trust as the highest amount one agent can borrow from another agent, and derive a reduced-form expression for this quantity which we then use in three applications. (1) We predict that dense networks generate bonding social capital that allows transacting valuable assets, while loose networks create bridging social capital that improves access to cheap favors like information. (2) For job recommendation networks, we show that strong ties between employers and trusted recommenders reduce asymmetric information about the quality of job candidates. (3) Using data from Peru, we show empirically that network-based trust predicts informal borrowing, and we structurally estimate and test our model.
Keywords: trust; social networks (search for similar items in EconPapers)
JEL-codes: D00 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (196) Track citations by RSS feed
Published in Quarterly Journal of Economics, August 2009, vol. 124 no. 3, pp. 1307-1361
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: Trust and Social Collateral (2009)
Working Paper: Trust and Social Collateral (2009)
Working Paper: Trust and Social Collateral (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13026
Access Statistics for this paper
More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().