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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 03-21:
Social Capital, Corruption and Economic Growth: Eastern and Western Europe

Gert Tinggaard Svendsen ()

Abstract: We hypothesize, that power centralisation in a political system leads to more corruption due to the

monopoly power status of bureaucrats. Corruption again would then lead to a lower level of social capital,

here measured as trust, and slow down economic growth even further. Indeed, when comparing the tables

and weighted averages for corruption and trust, highly corrupt countries such as those in Eastern Europe,

also tend have the lowest level of trust. In general, low levels of trust (measured as general trust and civic

participation) are also related to smaller Gross Domestic Product per capita levels. A similar pattern is

observed within Western Europe. In the European Union, ‘Northern EU’ member states generally hold less

corruption, more trust and higher Gross Domestic Product per capita compared to ‘Southern EU’ member

states. In perspective, the fate of Eastern Europe could then be a lesson for how to decentralise power and

accumulate trust in the future thus establishing better economic policies and the general business climate for

entrepreneurship.

Keywords: Social capital; trust; public policy; corruption; economic growth; Eastern Europe; Western Europe; (follow links to similar papers)

JEL-Codes: A12; C71; D23; D60; D70; Z13; (follow links to similar papers)

31 pages, January 28, 2003

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