More interpersonal trust can have a significant impact on growth in developing countries

December 15, 2009

It has been claimed that interpersonal trust can play more of a role in how an economy develops than capital, as the complexity of business transactions increases. In a recent thesis from the School of Business, Economics and Law at the University of Gothenburg, researcher Pelle Ahlerup demonstrates that there is reason to believe that interpersonal trust is more important in countries with a weak legal system, and that the quality of the legal system plays more of a role in societies where there is less trust between people.

"My research shows that trust between people can replace poorly functioning social institutions and vice versa," says Ahlerup, an economics researcher at the School of Business, Economics and Law. "Projects that aim to increase interpersonal trust can have a major impact in poor countries where investors and the general public do not have access to a reliable legal system. This also means that countries with low levels of trust between people have more to gain from improving the quality of their legal system and other social institutions."

Previous research has shown that countries where people have greater trust in each other generally perform better in a number of areas and have higher growth figures. Similar results have been shown for the importance of the legal system and other social institutions - countries with more reliable institutions generally have a higher standard of living.

"In my thesis, I adopt a different approach to previous studies when discussing the effects of access to social capital, and compare different countries," continues Ahlerup. "The results of my research can be used to increase our understanding of when trust plays a role and when it doesn't in terms of growth."

The thesis, which comprises five separate articles in the fields of institutional and political economics, also includes discussions of why there are such major differences between countries in terms of the number and size of different population groups and the consequences these can have; the impact of the strength of populations' national identity on how effectively states can be governed; and how and why natural catastrophes affect the risk of civil war.
-end-
The thesis has been successfully defended.

Author: Pelle Ahlerup
Title: "Essays on Conflict, Institutions, and Ethnic Diversity"
Institution: Department of Economics, School of Business, Economics and Law, Gothenburg University
Link to thesis: http://hdl.handle.net/2077/21200

University of Gothenburg

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