Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2014:30: Social Exchange and Generalized Trust in China

Victor Nee (), Sonja Opper () and Hakan J. Holm ()
Additional contact information
Victor Nee: Department of Sociology, Cornell University, Postal: 323 Uris Hall, Cornell University, Ithaca, NY 14853 , USA
Sonja Opper: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Hakan J. Holm: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper examines how social relations and norms contribute to the emergence of generalized trust in economic action. Our core proposition is that the more positive the local social exchange relationship, the greater an actor’s propensity to place trust in strangers. Our research design integrates behavioral measures elicited by incentivized experimental trust games with survey data using a random sample of 540 founding CEOs of manufacturing firms in the Yangzi delta region of China. Our analysis shows that characteristics of repeated social exchange—depth, prosociality and control—are positively associated with an economic actor’s proclivity for generalized trust. Founder CEOs with deeper and more valued exchange relations are more likely to trust strangers. Likewise, we find robust evidence of a positive association between beliefs in the effectiveness of community social control and trust in strangers.

Keywords: Generalized Trust; Networks; Social Exchange; Norms; CEOs

JEL-codes: C90; D85; L26

46 pages, August 21, 2014

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