TRUST, ECONOMIC GROWTH AND IMPORTANCE OF THE INSTITUTION

HEEKYUNG SON

Abstract:

To keep making economic development continuously these days, there is a newly widespread awareness that it is definitely important to accumulate not only the physical and human capital but also the social capital. Many people have been paying attention to the trust which is one of the most representative factors in the social capital from an economic point of view as there are increasing empirical evidences to demonstrate pretty convincingly that the social capital significantly contributes to the economic growth. In order to analyze how the social capital has an impact on the economic growth and what kind of factors make the level of trust changed, I adopted the Corruption Perception Index(CPI) as the indicator representing the "trust" so as to compare its CPI with those of other countries and analyzed data of the CPI from 34 OECD member countries from 2001 to 2013. As for the analysis of the variable factor for the level of trust, I made use of detailed institutional variables such as the political stability, the level of law and order, whether corruption is controlled or not, economic freedom and so on. As a result, the CPI has a positive correlation with the growth rate of the real GDP per capita in the pooled OLS and random effect panel analysis while it has a negative correlation with them in the fixed effect panel analysis, which means there are a variety of regulations to control corruption and the more members of society put even more efforts to abide by social norms, the more negative the growth rate of the real GDP per capita gets as time goes by. I think that's why almost all of advanced countries already built such enough social norms and standards that they do not play any significant role in economy.

Keywords:
Social capital, GDP, Economic growth, Trust, Institution

DOI: 10.52950/ES.2016.5.4.003

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APA citation:
HEEKYUNG SON (2016). Trust, Economic Growth and Importance of the Institution. International Journal of Economic Sciences, Vol. V(4), pp. 32-50. , DOI: 10.52950/ES.2016.5.4.003


Copyright © 2016, Heekyung SON et al, hkson08@korea.kr