The Economic Implications of Trust in Fostering Growth and Convergence
Year: 2024
Type: article
Abstract: This study investigates the role of trust in fostering economic growth and integration, using a trust-based economy model validated through the Markov process. Trust is examined as a key variable influencing the interactions between individuals, institutions, and the state, which in turn affects economic convergence and growth. The model compares two economies—one with high levels of trust and one with low trust—demonstrating that the trust-based economy achieves convergence in fewer iterations, indicating a faster path to equilibrium. Conversely, the economy with lower trust experiences delayed convergence, leading to higher social and economic costs. The findings emphasize the importance of trust in reducing transaction costs, improving cooperation, and enhancing institutional efficiency. For policymakers, the study highlights the need to foster trust through transparent governance, social cohesion, and institutional reforms to accelerate economic integration, boost investment, and enhance overall societal welfare.
DOI: 10.70389/pjss.100006
Author: Syed Sibghatullah Shah
Institution: Quaid-i-Azam University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4405179494