Bjørnskov Christian: Department of Economics, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Abstract: I examine the causal relation between social capital and corruption. A simple model illustrates potential mechanisms and yields testable implications, which I estimate in a sample of European countries. The estimated effect of social capital on corruption is found to be robust to the inclusion of a number of other variables and supplementing the sample with slightly older data from non-European countries. The evidence of the reverse causal direction is weak. I suggest that it is possible to build social capital through investing in education, interest in society and some level of income redistribution, which in turn reduces corruption.
31 pages, January 7, 2003
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