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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 05-7:
Love Thy Neighbor: Bonding versus Bridging Trust

Odile Poulsen () and Gert Tinggaard Svendsen ()

Abstract: We study how trust is generated in society. In a two-sector

model, we analyze two communities. In the bonding community people do not

trust people outside their regular networks. In the bridging community people

choose to trust strangers when they meet them. The hypothesis is that when

trust is only bonding, it cannot accumulate. Our theoretical contribution is to

show that when trust is only bonding then the economy’s level of trust moves

to an unstable equilibrium that may under certain conditions ‡uctuate forever.

If, however, trust is also bridging, then trust will accumulate. Future research

should seek to establish the appropriate institutional framework for establishing

the optimal mix between both bonding and bridging social capital in society.

Keywords: Trust; two-sector model; chaos; (follow links to similar papers)

JEL-Codes: A12; C61; D90; O41; (follow links to similar papers)

28 pages, September 2, 2005

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