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The role of social capital in financial development

Guiso, L., Sapienza, P., & Zingales, L. (2004)

Key facts

Journal/Publisher
American Economic Review
Type of publication
Journal article
Elements of social cohesion
Other (social capital)
Geographical focus
Italy
Main thematic areas
Inequality

Summary

To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.

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