Explaining social capital effects on growth and property rights via trust-alternative variables

In our previous paper “Can Trust Explain Social Capital Effect on Property Rights and Growth?” (Hall & Ahmad, 2013) we show that generalized trust data by the World Value Survey (WVS) are unable to yield sufficiently robust results in panel estimation due to missing observations problem. In this paper, we propose a number of trust-alternative variables to proxy for social capital and re-estimate its effect on growth and property rights. The results improve significantly and we are able to show that social capital is a deep determinant of growth and its effect on growth runs via the property rights channel. The findings also give supporting evidence to the primacy of informal rules and constraints as proposed by North (2005) over the political prominence theory by Acemoglu, Johnson, & Robinson (2005). The results partially confirm the findings by Williamson & Kerekes (2011) on the underlying determinants of property rights and provide empirical support to the Clague, Keefer, Knack, & Olson (1999)’s argument of a positive relationship between contract intensive money and property rights.