A fundamental question in social sciences is how trust emerges. We provide an answer which relies on the formation of social and economic relationships. We argue that behind trust lies the fact that individuals invest in connections taking into account the potential externalities networks...

Field studies of networks have uncovered a preference to befriend people we perceive as similar according to some dimensions of our identity (“homophily”). Lab studies of network formation games have found that adherence to social norms of reciprocity and inequity aversion are also drivers...

The economic success and innovative outcomes of the high performing East Asian countries, albeit often characterized as low-trust societies, suggests reexamination of the presumed positive relationship between social trust and innovation. Multi-level analyses conducted in this paper reveal that...