Trust in China: A Cross-Regional Analysis

Abstract

Using the cross-regional data, this paper shows that trust has a strong effect on uneven development of economy in China. As is discovered in many studies, it is found that trust affects the growth of economy, size distribution of enterprise, and FDI inflow and so on. We also find that cross-regional differences of trust in China are reflections of the regional diversities of education, marketization of economies, urbanization, population density and transportation facilities. Although not statistically significant, “too many officials” may damage social trust. The paper demonstrates that trust cannot simply be taken as a cultural heritage. The paper also argues that sustainability of further economic development of China much depends on how fast China can build trust-facilitating institution, and that the most fundamental institution for trust is the property right.Trust, Economic performance, Information Repeated game, Transaction