Scandinavian Working Papers in Economics

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

No 06-2: How Does Social Trust Affect Economic Growth?

Christian Bjørnskov ()
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Christian Bjørnskov: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

Abstract: This paper connects two strands of the literature on social trust by estimating the effects of trust on growth through a set of potential transmission mechanisms directly. It does so by modelling the process using a three-stage least squares estimator on a sample of countries for which a full data set is available. The results indicate that trust affects schooling and the rule of law directly. These variables in turn affect the investment rate (schooling) and provide a direct effect (rule of law) on the growth rate. The paper closes with a short discussion of the relevance of the findings.

Keywords: Growth; Trust; Transmission mechanisms

JEL-codes: N40; O10; Z13

44 pages, May 4, 2006

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06-2_CB.pdf PDF-file 

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