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Using Experimental Economics to Measure Social Capital and Predict Financial Decisions

Dean Karlan ()

No 182, Working Papers from Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies.

Abstract: Economic theory suggests that market failures arise when contracts are difficult to enforce or observe. Social capital can help solve these failures. The more individuals trust each other, the more able they are to contract with each other.1 Hence, many believe trust is a critical input for both macro- and microeconomic outcomes. The Trust game has become a popular tool, with many researchers conducting it in both university laboratories and field locations in developing countries (Abigail M. Barr, 2003, Joyce E. Berg et al., 1995, Edward L. Glaeser et al., 2000). These studies have found that behaviors in the Trust game correlate intuitively with individual attitudes and the relationships between players. However, these are not outcomes of real interest, but rather proxies (or correlates) for the ability to overcome market failures and complete otherwise difficult to enforce contracts.

Keywords: Peru (search for similar items in EconPapers)
JEL-codes: O15 Z13 (search for similar items in EconPapers)
Date: 2005-07
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Journal Article: Using Experimental Economics to Measure Social Capital and Predict Financial Decisions (2005) Downloads
Working Paper: Using Experimental Economics to Measure Social Capital And Predict Financial Decisions (2005) Downloads
Working Paper: Using experimental economics to measure social capital and predict financial decisions (2004) Downloads
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