Economics Letters 117 (2012) 156–160
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Does market participation promote generalized trust? Experimental evidence from Southern Africa Shephard Siziba a , Erwin Bulte b,∗ a
Forum for Agricultural Research in Africa (FARA), SSA CP ZMM Pilot site, University of Zimbabwe Box MP 167, Harare, Zimbabwe
b
Development Economics Group, Wageningen University, PO Box 8130, 6700 EW, Wageningen, Netherlands
article
info
Article history: Received 16 December 2011 Received in revised form 20 April 2012 Accepted 4 May 2012 Available online 14 May 2012
abstract Does market participation promote generalized morality and trust, as postulated by some recent theories? We use experimental data from Zimbabwe and Mozambique to probe into one specific component of this question, and find evidence to the contrary. The short-term effect of market integration appears to be to lower generalized trust. However, this finding is not robust across all countries. © 2012 Published by Elsevier B.V.
JEL classification: A13 B52 D03 Z13 Keywords: Trust Generalized morality Market integration Trade
1. Introduction Ever since cross-country studies suggested a positive correlation between trust and economic performance (e.g. Knack and Keefer, 1997), the concept ‘‘trust’’ has been an important research subject in the economic literature. By lowering transaction costs, trust should facilitate trade and generate static and dynamic efficiency gains. This insight is not new. Arrow (1972, p. 357) wrote: ‘‘virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time. It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence’’. In recent years several authors have examined the relation between market integration and generalized trust. Fafchamps (2011) argues that market exchange is ‘‘inherently immoral’’ because it provides no safeguard against inequitable outcomes and fails to elicit emotional bonds between trading individuals. For trade to flourish and extend beyond ‘‘flea market’’ barter
∗
Corresponding author. Tel.: +31 317 485286; fax: +31 317 484360. E-mail addresses:
[email protected],
[email protected] (E. Bulte).
0165-1765/$ – see front matter © 2012 Published by Elsevier B.V. doi:10.1016/j.econlet.2012.05.003
or cash-and-carry modes of exchange, market exchange should receive ‘‘moral validation’’. Moral obligations of fairness and reciprocity should extend to a much larger group of individuals than kith and kin — as typically in traditional societies based on self-provision (Platteau, 1994). A so-called generalized morality, involving punishment of opportunistic contract breach, should develop and spread across society. By enhancing fair conduct of trading partners, generalized morality should foster generalized trust in anonymous others. Data collected in behavioral experiments indeed suggest a positive correlation between market integration and fairness (Henrich et al., 2004). Henrich et al. (2010, p. 1484) conclude that market integration ‘‘involved the selective spread of those norms and institutions that best facilitated the successful exchange and interaction in socioeconomic spheres well beyond local networks of durable kin and reciprocity-based relationships’’. Arguably, a chicken-and-egg story eventuated.1 Tu and Bulte (2010) demonstrate that trusting individuals are more likely to participate in markets, and Fischer (2008) argues that market
1 See also Tabellini (2008), who develops a theoretical model to analyze the longterm co-evolutionary dynamics between morality and trade (via inter-generational transmission of values, and electoral processes determining contract enforcement).
S. Siziba, E. Bulte / Economics Letters 117 (2012) 156–160
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Table 1 Descriptive statistics. Mozambique Platform a
Zimbabwe Control b
Platform
Pooled Control
Platform a
Control
Trust in villagers
2.30 (1.57)
3.36 (1.43)
3.30 (1.13)
3.06 (1.23)
2.76 (1.47)
3.2b (1.33)
Trust in strangers
1.39a (1.18)
2.41b (1.47)
2.02 (0.99)
2.04 (1.14)
1.68a (1.14)
2.21b (1.31)
Market participation
0.68a (0.47)
0.30b (0.46)
0.47a (0.50)
0.34b (0.47)
0.58a (0.50)
0.32b (0.47)
Education
0.44a (0.50)
0.16b (0.37)
0.64 (0.48)
0.73 (0.45)
0.53 (0.50)
0.46 (0.50)
Asset index
−0.30a (1.19)
−0.68b (0.86)
2.11 (2.22)
1.70 (2.32)
0.80 (2.11)
0.60 (2.15)
Hh size
7.15 (4.54)
8.07 (4.23)
5.494 (2.48)
5.78 (2.26)
6.39 (3.82)
6.85 (3.51)
Gender
0.94 (0.23)
0.96 (0.19)
0.71a (0.46)
0.83b (0.38)
0.84 (0.37)
0.89 (0.31)
Age
44.3 (14.3)
46.7 (15.6)
50.0 (16.1)
51.8 (15.9)
46.9 (15.6)
49.4 (16.0)
N
105
165
89
190
194
355
Different letters denote statistically significant differences (p-value
