Working Paper: CEPR ID: DP6657
Authors: Luigi Guiso; Paola Sapienza; Luigi Zingales
Abstract: To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapped in a low-trust equilibrium. In this context, a temporary shock to the return to trusting can have a permanent effect on the level of trust. We validate the model by testing its predictions on the World Values Survey data and the German Socio Economic Panel. We also present some anecdotal evidence that differences in priors across regions are reflected in the spirit of the novels that originate from those regions.
Keywords: Culture; Social Capital; Trust
JEL Codes: E00; P26; Z1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| parents' beliefs about trustworthiness (Z13) | children's beliefs about trustworthiness (Z13) |
| cultural narratives (Z10) | differences in social capital (Z13) |
| intergenerational transmission of conservative priors about trustworthiness (D15) | low-trust equilibria (D51) |
| temporary positive shock to the benefits of cooperation (C71) | permanent shift in trust levels (Z13) |
| trust inherited from parents (D15) | individuals' trust levels (Z13) |
| cultural transmission (Z13) | persistence of social capital across generations (Z13) |