The impact of social capital on Central and Eastern European countries' economic performance: similarities and differences

Tags: international_projects, human_capital, social_development, macroeconomics, cerge-ei_foundation, projects_from_2010

Completion date: 17.06.2010

We propose a novel mechanism giving rise to poverty traps and multiple equilibria in economic performance. It is a potentially important source of persistent underdevelopment across countries and regions. At the core of this mechanism, bridging social capital and social trust feed back on each other, interdependently affecting individuals - earnings and subjective well-being. High trust and abundant bridging social capital reinforce each other, leading to a 'high' equilibrium where both these variables take persistently high values, and earnings and well-being are high as well, whereas low trust and lacking bridging social capital create a vicious circle, leading to a 'low trust trap' where all these variables are persistently low. The workings of our theoretical model are in agreement with a wide range of findings from the contemporary literature in sociology and social psychology.

Project being done for: CERGE-EI Foundation

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