Trustworthiness and Social Capital in South Africa: Analysis of Actual Living Standards Data and Artifactual Field Experiments

The article examines the claim that trustworthiness affects economic outcomes, especially in low-income economies where markets and other formal institutions tend to fail. A second key feature of this study is that individuals selected to participate in the experimental study belonged to a random sample of South African communities that are part of the KwaZulu-Natal Income Dynamics (KIDS) longitudinal living standards study. Section II presents the intuition behind our strategy to measure trustworthiness using multiple economic experiments and uses a simple behavioral model to derive a measure of trustworthiness that is purged of the influence of altruism. A second problem with directly interpreting trust game results as indicators of trust and trustworthiness is that play in this game may be shaped by other considerations. The trust game described above is particularly appropriate for the analysis of social capital because its structure matches the incentives of a loan contract in which there is no legal enforcement of repayment obligations.