Many argue that elements of a society's norms, culture or social capital are central to understanding its development. However, these notions have been difficult to capture in economic models. Here, we argue that trustworthiness is the economically relevant component of a society's culture and,...

This paper develops a theory in which individuals can use one of two types of human/social capital to enforce contracts: "Local capital" relies on families and other personal networks; "market capital" relies on impersonal market institutions such as auditors and courts. Local capital is...