We provide new measures of ethnic, linguistic, and religious fractionalization for about 190 countries. These measures are more comprehensive than those previously used in the economics literature and we compare our new variables with those previously used. We also revisit the question of the effects of ethnic, linguistic, and religious heterogeneity on the quality of institutions and growth. We partly confirm and partly modify previous results. The patterns of cross-correlations between potential explanatory variables and their different degree of endogeneity makes it hard to make unqualified statements about competing explanations for economic growth and the quality of government. Our new data, which features the underlying group structure of ethnicities, religions and languages, also allows the computation of alternative measures of heterogeneity, and we turn to measures of polarization as an alternative to the commonly used index of fractionalization.

A standard optimal investment model can be used to analyse an individual’s decision to ac-cumulate social capital. We analyse six facts that support the predictions of this individual-based approach: (1) social capital first rises and then falls with age, (2) social capital declines with expected mobility, (3) social capital rises in occupations with greater returns to social skills, (4) social capital is higher among homeowners, (5) social connections fall sharply with physical distance, (6) people who invest in human capital also invest in social capital. We fail to find robust evidence that social capital investments fall with the value of time or that geo-graphic/religious groups generate social capital complementarities. A growing body of research documents significant correlations between ‘social capital ’ variables, such as membership in organisations, and important economic outcomes.1 Putnam (1993) jump-started the research on social capital when he found a strong correlation between measures of civic engagement and government quality across regions in Italy. Many authors have contributed to this literature. For example, Knack and Keefer (1997) find that a one-standard deviation increase in a survey-based measure of country-level trust increases economic growth by more

This paper surveys the modern economics literature on the role of neighborhoods in influencing socioeconomic outcomes. Neighborhood effects have been analyzed in a range of theoretical and applied contexts and have proven to be of interest in understanding questions ranging from the asymptotic properties of various evolutionary games to explaining the persistence of poverty in inner cities. As such, the survey covers a range of theoretical, econometric and empirical topics. One conclusion from the survey is that there is a need to better integrate findings from theory and econometrics into empirical studies; until this is done, empirical studies of the nature and magnitude of neighborhood effects are unlikely to persuade those skeptical about their importance.

ABSTRACT Explanations of poverty, growth and development depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour. Economic experiments, especially those conducted in the field, have begun to paint a picture of economic agents in developing communities that is at variance with the traditional portrait. We review this growing literature with an eye towards preference-related experiments conducted in the field. We also offer lessons on what development economists might learn from experiments. We conclude by sharing our thoughts on how to conduct experiments in the field and then offer a few ideas for future research.

The existence of a beauty premium in the labor market and the malefemale wage gap suggests that appearance can matter in the real world. We explore beauty and gender in a public goods experiment and find similar effects. We find a beauty premium, even though beautiful people contribute, on average, no more or less than others. The beauty premium, however, disappears when we provide information on individual contributions, and becomes a beauty penalty. Players seem to expect beautiful people to be more cooperative. Relative to these expectations, they appear more selfish, which in turn results in less cooperation by others. These appear to be clear examples of stereotyping. We also find a substantial benefit tobeing male, especially with information. This is primarily due to men being better “leaders.” Men tend to make large contributions, and people follow their example and give more in later rounds.

An important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending. This research presents evidence from field experiments in South Africa and Armenia, in which subjects participate in trust games and a microfinance game. We present moderately strong evidence that personal trust between group members and peer homogeneity are more important to group loan repayment than general societal trust or mere acquaintanceship between members. We also find some evidence of reciprocity in groups: those who have been helped by other members are more likely to contribute themselves.

This paper provides field experimental evidence on the prevalence and determinants of discrimination and in-group favoritism in trust decisions. We observe choices of about 1,000 inhabitants of the city of Zurich who take part in a sequential trust game, in which first movers can condition their investments on the residential districts of second movers. Our main results can be summarized as follows: First movers discriminate significantly in their investment choices, i.e., strangers receive different investments depending on the district they live in. The systematics of the discrimination pattern is underlined by data from an additional newspaper study, where participants correctly guessed the outcome of the study. In terms of district characteristics two factors seem to be key for a district’s reputation: while expected trustworthiness of a district increases in the socio-economic status it decreases in the degree of ethnic heterogeneity. Observed discrimination is not just based on mistaken stereotypes but can at least partly be classified as statistical discrimination. This can be inferred from the fact that, on a district level, both expected return on investment and actual investments are positively correlated with actual back

The need for social connection is a fundamental human motive, and it is increasingly clear that feeling socially connected confers mental and physical health benefits. However, in many cultures, societal changes are leading to growing social distrust and alienation. Can feelings of social connection and positivity toward others be increased? Is it possible to self-generate these feelings? In this study, the authors used a brief loving-kindness meditation exercise to examine whether social connection could be created toward strangers in a controlled laboratory context. Compared with a closely matched control task, even just a few minutes of loving-kindness meditation increased feelings of social connection and positivity toward novel individuals on both explicit and implicit levels. These results suggest that this easily implemented technique may help to increase positive social emotions and decrease social isolation.

Extensive research has documented the importance of social trust for economic development, yet the origins of trust remain largely unexplored. This paper examines the historical relationship between risk, cooperation and the emergence of social trust. I hypothesize that norms of trust developed in preindustrial times as a result of experiences of collective action and mutual insurance triggered by the need for subsistence farmers to cope with climatic risk. These norms persisted over time, even after climate had become largely unimportant for economic activity. I test this hypothesis in the context of Europe combining high-resolution climate data for the period 1500-2000 with contemporary survey data at the sub-national level. I find that regions characterized by higher year-to-year variability in precipitation and temperature display higher levels of trust. Consistent with a theory of insurance through geographic differentiation, I also find that trust is higher in regions with more spatially heterogeneous precipitation. Furthermore, variation in social trust is driven by weather patterns during the growing season and by historical rather than recent variability. These results are robust to the inclusion of country fixed-effects, a variety of geographical controls, and regional measures of early political and economic development.

A recent literature finds a positive relationship between trust and economic growth & trade in macro-level data, whose nature makes it difficult to separate out the direction of causality. In this paper we use a micro-level dataset on individual venture capital investments, where trust (measured bilaterally as the people’s trust in one country, for people from different countries) is clearly exogenous. We find that trust has a significant effect on the likelihood that a venture capitalist invests in a company. This holds even after accounting for many alternative factors likely to influence investment, such as information or geographic distance between investors and companies. Our hand-collected dataset also provides information on contractual structures. If investors have less trust, they rely more on other investors, they choose financial securities that providemoredownsideprotection,andtheyare less likely to implement contingent control structures. The analysis suggests that trust is an important economic factor that affects the formation of investments, as well as their contractual structure. We are grateful to all the venture capital firms which provided us with data. We thank Roberto