DP6657 Social Capital as Good Culture

Author(s): Luigi Guiso , Paola Sapienza , Luigi Zingales

Publication Date: January 2008

Keyword(s): culture , social capital , trust

JEL(s): E00 , P26 , Z1

Programme Areas: Development Economics , International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP6657.asp.asp

To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that differences in priors across regions are reflected in the spirit of the novels that originate from those regions.