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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 06-2:
How Does Social Trust Affect Economic Growth?

Christian Bjørnskov ()

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; (follow links to similar papers)

JEL-Codes: N40; O10; Z13; (follow links to similar papers)

44 pages, May 4, 2006

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