Trust is essential for the market economy: it reduces transactions costs and facilitates cooperation between economic agents. In this chapter I provide an overview of how trust has been defined and measured in the literature. I review the role of trust in the market, command, and transition economies, distinguishing between particular and extended trust. Extended trust plays a crucial role in economic development, yet it is lacking in transition economies due to the socialist legacy. I discuss how particular and extended trust were affected by communism and the turmoil of early transition, before turning to review some key debates on how extended trust is created and how it relates to particular trust and the institutional environment.


Trust Transaction Costs Informal Institutions Networks Social Capital 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aghion, P., Y. Algan, P. Cahuc, and A. Schleifer (2010). ‘Regulation and distrust’. The Quarterly Economics Journal, 125(3), 1015–1049.CrossRefGoogle Scholar
  2. Aidis, R., S. Estrin, and T. Mickiewicz (2012). ‘Size matters: Entrepreneurial entry and government’. Small Business Economics, 39(1), 119–139.CrossRefGoogle Scholar
  3. Alesina, A. and P. Giuilano (2013). ‘Family ties’. NBER Working Paper, WP/18966. (Cambridge, MA: National Bureau of Economic Research).CrossRefGoogle Scholar
  4. Algan, Y. and P. Cahuc (2010). ‘Inherited trust and growth’. American Economic Review, 100(5), 2060–2092.CrossRefGoogle Scholar
  5. Algan, Y and P. Cahuc (2014). ‘Trust, growth, and well-being: New evidence and policy implications’ in P. Aghion and S. Durlauf (eds) Handbook of Economic Growth, Volume 2A (Oxford: North-Holland), 45–120.Google Scholar
  6. Arrighetti, A., R. Bachmann and S. Deakin, ‘Contract law, social norms and inter-firm cooperation’, Cambridge Journal of Economics, 21, 171–195.Google Scholar
  7. Arrow, K. (1972). ‘Gifts and exchanges’. Philosophy and Public Affairs, 1(4), 343–362.Google Scholar
  8. Axelrod, R. (1984). The evolution of cooperation (New York: Basic Books).Google Scholar
  9. Banfield, E.C. (1958). The moral basis of a backward society (London: Free Press).Google Scholar
  10. Barro, R.J. (1999). ‘Determinants of democracy’. Journal of Political Economy, 107(6), 158–183.CrossRefGoogle Scholar
  11. Berg, J., J. Dickhaut, and K. McCabe (1995). ‘Trust, reciprocity, and social history’. Games and Economic Behavior, 10(1), 122–142.CrossRefGoogle Scholar
  12. Beugelsdijk, B.S. (2005). ‘A note on the theory and measurement of trust in explaining differences in economic growth’. Cambridge Journal of Economics, 30(3), 371–387.CrossRefGoogle Scholar
  13. Beugelsdijk, B.S., H.L.F. de Groot, and A.B.T.M. van Schaik (2004). ‘Trust and economic growth: A robustness analysis’. Oxford Economic Papers, 56(3):118–134.CrossRefGoogle Scholar
  14. Bjornskov, C. (2012). ‘How does social trust affect economic growth?’ Southern Economic Journal, 78(4), 1346–1368.CrossRefGoogle Scholar
  15. Blanchard, O. and M. Kremer (1997). ‘Disorganization’. The Quarterly Journal of Economics, 112(4), 1091–1126.CrossRefGoogle Scholar
  16. Bloom, N., R. Sadun, and J. van Reenen (2012). ‘The organization of firms across countries’. The Quarterly Journal of Economics, 127(4), 1663–1705.CrossRefGoogle Scholar
  17. Bradach, J.L. and R.G. Eccles (1991). ‘Price, Authority and Trust: From Ideal Types to Plural Forms’ in G. Thompson, J. Frances, R. Levacic, and J. Mitchill (eds) Markets, hierarchies and networks: the coordination of social life (London: Sage), 227–292.Google Scholar
  18. Capra, M., K. Lanier, and S. Meer (2008). ‘Attitudinal and behavioural measures of trust: A new comparison’. Working Paper, (Atlanta: Emory University, Department of Economics).Google Scholar
  19. Carlin, B., F. Dorobantu, and S. Viswanathan (2009). ‘Public trust, the law, and financial investment’. Journal of Financial Economics, 92(3), 321–341.CrossRefGoogle Scholar
  20. Chavance, B. (1995). ‘Hierarchical forms and coordination problems in socialist systems’. Industrial and Corporate Change, 4(1), 271–291.CrossRefGoogle Scholar
  21. Chiles, T.H. and J.F. McMackin (1996). ‘Integrating variable risk preferences, trust, and transaction cost economics’. Academy of Management Review, 21(1), 73–99.Google Scholar
  22. Coase, R. (1937). ‘The nature of the firm’. Economica, 4(16), 386–405.CrossRefGoogle Scholar
  23. Costello, N. (2001). ‘Modelling the firm’ in S. Himmelweit, R. Simonetti, and A. Trigg (eds) Microeconomics: Neoclassical and Institutionalist Perspectives on Economic Behaviour (London: Thomson/Open University), 205–225.Google Scholar
  24. Cox, J.C. (2004). ‘How to identify trust and reciprocity’. Games and Economic Behavior, 46(2), 260–281.CrossRefGoogle Scholar
  25. Dasgupta, P. (1988). ‘Trust as a commodity’ in D. Gambetta (ed.) Trust: Making and Breaking of Cooperative Relations (Oxford: Oxford University Press), 49–71.Google Scholar
  26. Dearmon, J. and R. Grier (2009). ‘Trust and development’. Journal of Economic Behavior and Organization, 71(2), 210–220.CrossRefGoogle Scholar
  27. Dearmon, J. and R. Grier (2011). ‘Trust and the accumulation of physical and human capital’. European Journal of Political Economy, 27(3), 507–519.CrossRefGoogle Scholar
  28. Delhey, J., K. Newton and C. Welzel (2011). ‘How general is trust in “most people”? Solving the radius of trust problem’. American Sociological Review, 76(5), 786–807.CrossRefGoogle Scholar
  29. Denisova, I, M. Eller, and E. Zhuravskaya (2010). ‘What do Russians think about transition?’ Economics of Transition, 18(2), 249–280.CrossRefGoogle Scholar
  30. de Tocqueville, A. (1994). Democracy in America (London: David Campbell).Google Scholar
  31. D’Hernoncourt, J. and P.G. Méon (2012). ‘The not so dark side of trust: Does trust increase the size of the shadow economy?’ Journal of Economic Behavior and Organization, 81(1), 97–121.CrossRefGoogle Scholar
  32. Dixit, A.K. (2004). Lawlessness and economics: Alternative modes of governance. (Princeton, NJ: Princeton University Press).Google Scholar
  33. Durlauf, S.N. (2002). ‘On the empirics of social capital’. The Economic Journal, 112, 459–479.CrossRefGoogle Scholar
  34. Efendic, A., T. Mickiewicz, and A. Rebmann (2015). ‘Growth aspirations and social capital: Young firms in a post-conflict environment’. International Small Business Journal, 33(5): 537–561.CrossRefGoogle Scholar
  35. Ermisch, J. and E. Gambetta (2010). ‘Do strong family ties inhibit trust?’ Journal of Economic Behavior and Organization, 75(3), 365–376.CrossRefGoogle Scholar
  36. Estrin S. and T. Mickiewicz (2011). ‘Entrepreneurship in transition economies: the role of institutions and generational change’ in M. Minniti (ed) Dynamics of Entrepreneurship (Oxford: Oxford University Press), 181–208.CrossRefGoogle Scholar
  37. Fidrmuc, J. and K. Gerxhani (2008). ‘Mind the gap! Social capital, East and West’. Journal of Comparative Economics, 36(2), 264–286.CrossRefGoogle Scholar
  38. Fukuyama, F. (1995). Trust: The social virtues and the creation of prosperity (London: Penguin).Google Scholar
  39. Fukuyama, F. (2001). ‘Social capital, civil society and development’. Third World Quarterly, 22(1), 7–20.CrossRefGoogle Scholar
  40. Gambetta, D. (1988). ‘Can we trust trust?’ in D. Gambetta (ed) Trust: Making and Breaking of Cooperative Relations (Oxford: Oxford University Press), pp.49–71.Google Scholar
  41. Glaeser, E., D. Laibson, J. Scheinkman, and C. Soutter (2000). ‘Measuring trust’. Quarterly Journal of Economics, 115, 811–846.CrossRefGoogle Scholar
  42. Govier, T. (1996). ‘Trust and totalitarianism’. Journal of Social Philosophy, 27(3), 149–163.CrossRefGoogle Scholar
  43. Gulati, R. and M. Sytch (2008). ‘Does familiarity breed trust? Revisiting the antecedents of trust’. Managerial and Decision Economics, 29(2–3), 165–190.CrossRefGoogle Scholar
  44. Hardy, C., P. Nelson, and T. Lawrence (1998). ‘Distinguishing trust and power in interorganizational relations: forms and facades of trust’ in C. Lane and R. Bachmann (eds) Trust within and between organizations (Oxford: Oxford University Press), 64–87.Google Scholar
  45. Horváth, R. (2013). ‘Does trust promote growth?’ Journal of Comparative Economics, 41(3), 777–788.CrossRefGoogle Scholar
  46. Hosking, G. (2014). Trust: A history (Oxford: Oxford University Press).CrossRefGoogle Scholar
  47. Humphrey, J. and H. Schmitz (1998). ‘Trust and inter-firm relations in developing and transition economies’. Journal of Development Studies, 34(4), 32–61.CrossRefGoogle Scholar
  48. James, H., Jr. (2014). ‘You can have your trust and calculativeness, too: Uncertainty, trustworthiness and the Williamson thesis’. Journal of Trust Research, 4(1), 57–65.CrossRefGoogle Scholar
  49. Johanson, M. (2008). ‘Institutions, exchange and trust: A study of the Russian transition to a market economy’. Journal of International Management, 14(1), 46–64.CrossRefGoogle Scholar
  50. Johnson, S., J. McMillan, and C. Woodruff (1999). ‘Contract enforcement in transition’. EBRD Working Paper, WP/45 (London: European Bank for Reconstruction and Development).Google Scholar
  51. Johnson, S., J. McMillan, and C. Woodruff (2002). ‘Courts and relational contracts’. Journal of Law, Economics, and Organization, 18(1), 221–277.CrossRefGoogle Scholar
  52. Karlan, D.S. (2005). ‘Using experimental economics to measure social capital and predict financial decisions’. American Economic Review, 95(5), 1688–1699.CrossRefGoogle Scholar
  53. Kautonen, T. (2006). ‘Trust as a governance mechanism in inter-firm relations — conceptual considerations’. Evolutionary Institutional Economics Review, 3(1), 89–108.CrossRefGoogle Scholar
  54. Knack, S. and P. Keefer (1997). ‘Does social capital have an economic payoff? A crosscountry investigation’. The Quarterly Journal of Economics, 112(4), 1251–1288.CrossRefGoogle Scholar
  55. Kolankiewicz, G. (1996). ‘Social capital and social change’. British Journal of Sociology, 47(3), 427–441.CrossRefGoogle Scholar
  56. Kornai, J. (1992). The Socialist system: The political-economy of Communism. (Princeton: Princeton University Press).CrossRefGoogle Scholar
  57. Kramer, R.M. (1999). ‘Trust and distrust in organizations: Emerging perspectives, enduring questions’. Annual Review of Psychology, 50, 569–598.CrossRefGoogle Scholar
  58. Lane, C. (1998). ‘Introduction: Theories and issues in the study of trust’ in C. Lane and R. Bachmann (eds) Trust Within and Between Organizations (Oxford: Oxford University Press), pp.1–30.Google Scholar
  59. Lassen, D.D. (2007). ‘Ethnic divisions, trust, and the size of the informal sector’. Journal of Economic Behavior and Organization, 63(3), 423–438.CrossRefGoogle Scholar
  60. Ledeneva, A. (1998). Russia’s economy of favours: Blat, networking and informal exchange (Cambridge: Cambridge University Press).Google Scholar
  61. Ledeneva, A. (2006). How Russia really works: The Informal practices that shaped post-soviet politics and business (Ithaca: Cornell University Press).Google Scholar
  62. Lee, D. (2013). ‘How does social capital reduce the size of the shadow economy?’ Global Economic Review, 42(3), 251–268.CrossRefGoogle Scholar
  63. Levi, M. (1998). ‘A state of trust’ in V. Braithwaite and M. Levi (eds) Trust and governance (New York: Russell Sage Found), 77–101.Google Scholar
  64. Levi, M. and L. Stoker (2000). ‘Political trust and trustworthiness’. Annual Review of Political Science, 3(1), 475–507.CrossRefGoogle Scholar
  65. Luhmann, N. (1988). ‘Familiarity, confidence, trust’ in D. Gambetta (ed) Trust: Making and breaking of cooperative relations (Oxford: Blackwell), 94–108.Google Scholar
  66. McDermott, G.A. (2002). Embedded politics: industrial networks and institutional change in post-communism (Ann Arbor: University of Michigan Press).CrossRefGoogle Scholar
  67. McEvily, B. (2011). ‘Reorganizing the boundaries of trust: From discrete alternatives to hybrid forms’. Organization Science, 22(5), 1266–1276.CrossRefGoogle Scholar
  68. McEvily, B. and M. Tortoriello (2011). ‘Measuring trust in organisational research: Review and recommendations’. Journal of Trust Research, 1(1), 23–63.CrossRefGoogle Scholar
  69. Mickiewicz, T. (2010). Economics of institutional change: central and eastern Europe revisited. (Basingstoke: Palgrave Macmillan).CrossRefGoogle Scholar
  70. Mishler, W. and R. Rose (1997). ‘Trust, distrust and skepticism: popular evaluations of civil and political institutions in post-communist societies’. The Journal of Politics, 59(2), 418–451.CrossRefGoogle Scholar
  71. Mòllering, G. (2014). ‘Trust, calculativeness, and relationships: A special issue 20 years after Williamson’s warning’. Journal of Trust Research, 4(1), 1–21.CrossRefGoogle Scholar
  72. Murrell, P. (2005). ‘Institutions and firms in transition economies,’ in C. Ménard and M. Shirley (eds) Handbook of New Institutional Economics. Volume 9. (Dordretch: Springer), 667–699.CrossRefGoogle Scholar
  73. Nannestad, P. (2008). ‘What have we learnt about generalized trust, if anything?’ Annual Review of Political Science, 11(1), 413–436.CrossRefGoogle Scholar
  74. Nelson, R.R. and S.G. Winter (1982). An evolutionary theory of economic change (Cambridge, MA: Belknap Press).Google Scholar
  75. Newton, K. and S. Zmerli (2011). ‘Three forms of trust and their association’. European Political Science Review, 3(2), 169–200.CrossRefGoogle Scholar
  76. Nooteboom, B. (2002). Trust: Forms, foundations, functions, failures and figures (Cheltenham: Edward Elgar).CrossRefGoogle Scholar
  77. North, D. C. (1990). Institutions, Institutional Change and Economic Performance. (Cambridge, Cambridge University Press).CrossRefGoogle Scholar
  78. Papagapitos, A. and R. Riley (2009). ‘Social trust and human capital formation’. Economics Letters, 102, 158–160.CrossRefGoogle Scholar
  79. Putnam, R.D. (1995). ‘Bowling alone: America’s declining social capital’. Journal of Democracy, 6(1), 65–78.CrossRefGoogle Scholar
  80. Raiser, M. (1999). ‘Trust in transition’. EBRD Working Paper, WP/39 (London: European Bank for Reconstruction and Development).Google Scholar
  81. Raiser, M., A. Rousso and F. Steves (2008). ‘Trust in transition: cross-country and firm evidence’, The Journal of Law, Economics & Organization, 24(2), 407–433.CrossRefGoogle Scholar
  82. Rose-Ackerman, S. (2001). ‘Trust, honesty and corruption: Reflection on the state-building process’. European Journal of Sociology, 42(3), 526–570.CrossRefGoogle Scholar
  83. Rothstein, B. (2003). ‘Social capital, economic growth and quality of government: the causal mechanism’. New Political Economy, 8(1), 49–71.CrossRefGoogle Scholar
  84. Rothstein, B. (2004). ‘Social trust and honesty in government: A causal mechanisms approach’ in J. Kornai, B. Rothstein, and S. Rose-Ackerman (eds) Creating trust in postsocialist transition (Basingstoke: Palgrave Macmillan), pp.13–30.CrossRefGoogle Scholar
  85. Rothstein, B. and D. Stolle (2012). ‘The State and Social Capital: An Institutional Theory of Generalized Trust’. Comparative Politics, 40(4), 441–450.CrossRefGoogle Scholar
  86. Rousseau, D. M., S. B. Sitkin, R. Burt and C. Camerer (1998). ‘Not so different after all: a cross-discipline view of trust’, Academy of Management Review, 23(3), 393–404.CrossRefGoogle Scholar
  87. Rubin, P.H. (2005). ‘Legal systems as frameworks for market exchanges’ in C. Menard and M. Shirley (eds) Handbook of New Institutional Economics (Dordrecht: Springer), 205–228.CrossRefGoogle Scholar
  88. Sako, M. (1998). ‘Does trust improve business performance?’ in C. Lane and R. Bachmann (eds) Trust within and between organizations (Oxford: Oxford University Press), 88–117.Google Scholar
  89. Sapienza, P., A. Toldra, and L. Zingales (2007). ‘Understanding trust’. NBER Working Paper, WP/13387 (Cambridge, MA: National Bureau of Economic Research).CrossRefGoogle Scholar
  90. Schneider, F., A. Buehn, and C.E. Montenegro (2010). ‘New estimates for the shadow economies all over the world’. International Economic Journal, 24(4), 443–461.CrossRefGoogle Scholar
  91. Slemrod, J. (1998). ‘On voluntary compliance, voluntary taxes, and social capital’. National Tax Journal, 51(3), 485–491.Google Scholar
  92. Sztompka, P. (1999). Trust: A sociological theory (Cambridge: Cambridge University Press).Google Scholar
  93. Tabellini, G. (2008). ‘Institutions and culture’. Journal of the European Economic Association, 6(2–3), 255–294.CrossRefGoogle Scholar
  94. Tonoyan, V., R. Strohmeyer, M. Habib, and M. Perlitz (2010). ‘Corruption and entrepreneurship: How formal and informal institutions shape small firm behavior in transition and mature market economies’. Entrepreneurship Theory and Practice, 34(5), 803–831.CrossRefGoogle Scholar
  95. Tversky, A. and D. Kahneman (1974). ‘Judgment under uncertainty: Heuristics and biases’. Science, 185(4157), 1124–1131.CrossRefGoogle Scholar
  96. Uslaner, E.M. (2002). The moral foundations of trust (Cambridge: Cambridge University Press).CrossRefGoogle Scholar
  97. Uslaner, EM. and G. Badescu. (2004) ‘Honesty, trust, and legal norms in the transition to democracy: Why Bo Rothstein is better able to explain Sweden than Romania’, in J. Kornai, B. Rothstein and S. Rose-Ackerman (eds) Creating Social Trust in Post-Socialist Transition. (Basingstoke: Palgrave Macmillan), 31–52.CrossRefGoogle Scholar
  98. Welter, F. (2012). ‘All you need is trust? A critical review of the trust and entrepreneurship literature’. International Small Business Journal, 30(3), 193–212.CrossRefGoogle Scholar
  99. Welter, F. and D. Smallbone (2006). ‘Exploring the role of trust in entrepreneurial activity’. Entrepreneurship, Theory and Practice, 30(4), 465–475.CrossRefGoogle Scholar
  100. Williamson, O.E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting (London: Collier Macmillan).Google Scholar
  101. Williamson, O.E. (1993). ‘Opportunism and its critics’. Managerial and Decision Economics, 14(2), 97–107.CrossRefGoogle Scholar
  102. Woodruff, C., 2004. ‘Establishing confidence in business partners: Courts, networks and relationships as pillars of support’, in J. Kornai, B. Rothstein and S. Rose-Ackerman (eds), Creating Trust in Post-Socialist Transition (Basingstoke: Palgrave Macmillan), 111–125.CrossRefGoogle Scholar
  103. Zak, P.J. and S. Knack (2001). ‘Trust and growth’. The Economic Journal, 111(470), 295–321.CrossRefGoogle Scholar
  104. Zucker, L.G. (1986). ‘The production of trust: Institutional sources of economic structure, 1840–1920’. Research in Organization Behavior, 8, 53–111.Google Scholar

Copyright information

© Anna Rebmann 2015

Authors and Affiliations

  • Anna Rebmann

There are no affiliations available

Personalised recommendations