Global Economic Development Class

1
Global Economic DevelopmentClass 18
Question What are the determinants of financial
development? Today trust, social capital
2
Guiso, Sapienza and Zingales The Role of Social
Capital in Financial Development Hypothesis
social capital (including what we called trust)
cause financial development. Definition of
social capital Sociology advantages and
opportunities accruing to people through
membership in certain communities, a resource
of individuals that emerges from social ties.
Example family. Country China. How to get a
job family contacts. Political scientists
features of social life networks, norms, and
trust- that enable participants to act together
more effectively to pursue shared objectives.
Example trial by jury. Country US. How to get a
job market, more anonymous! Practically, the two
definitions are almost opposite things one
implies strong small group trust, but little
across groups the other one, strong trust across
groups.
3

• Measures of social capital
• Voluntary electoral turnout
• Anonymous blood donations
• Number of cooperatives
• Measures of financial development
• Use of checks
• Cash/Financial wealth
• Deposits/Financial wealth
• Stock/Financial wealth
• No access to credit
• Family loans

4

• Control variables
• GDP per capita (of the province)
• Judiciary inefficiency (of the province)
• Income
• Wealth
• Age
• Education
• Household size
• Marital status
• Gender
• Industry dummies
• Job dummies
• Year dummies

5
Results Table 1, Panel A (Social capital is
important for checks) Table 9, Panel A (Trying to
identify causality) Table 12, Trust around the
world
6
(No Transcript)
7
(No Transcript)
8
(No Transcript)
9

• Conclusion
• Social capital seems important for financial
  development
• Not very clear how much it affects growth
• The substitution between social capital and
  legal enforcement should be studied in more
  detail