Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216462 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13150
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Trust and participation in social networks are inherently interrelated. We make use of India's demonetization policy, an unexpected and unforeseeable exogenous variation, to causally identify the effect of social networks in determining trust. We use first-hand quantitative and qualitative data from rural South India and control for individual characteristics (personality traits, cognitive ability) that could influence network formation and trust, finding that social interactions have a significant effect on trust among men, as well as across castes. Among lower castes, who live in homogeneous neighborhoods and relied on neighbors and employers to cope, extending one's network lowers trust in neighbors. Among middle castes, who live in more heterogeneous neighborhoods and relied predominantly on other caste members, a larger network size leads to greater trust placed in kin among employees but lesser in neighbors. This paper thus shows that social interactions can foster trust and highlights the importance of clearly defining in- and out-groups in trust measures within highly segregated societies.
Subjects: 
India
trust
social networks
JEL: 
O12
D85
D91
Document Type: 
Working Paper

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