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When we trust someone, it implies that the probability that he will perform an action that is beneficial is high enough

for us to consider in engaging in some form of cooperation with him. Correspondingly, when we say that someone is untrustworthy, we imply that that probability is low enough for us to refrain from doing so. The various types of trust include: deterrence-based trust, which is based on the threat of punishment if consistent behavior is not maintained (rational trust); knowledge based trust, which occurs when each party has enough information about the other to accurately predict the other's behavior; and identification-based trust, which results when each party has fully internalized the other's preferences, so that one party may serve as the other's agent, with the other being confident that her interests will be fully protected. In the first paper the various factors considered to affect trust levels include 1. Information The theory of prisoners dilemma under imperfect information shows that if players are less able to monitor the actions of others, there will be less cooperation and hence increased opportunistic or selfish behavior, since this makes it difficult to determine whether or not cheating has occurred. Thus there exists a positive correlation between trust and information. Better information flows imply greater trust. Trust increases with the frequency of interaction between the two parties involved. Medium of communication affects trust formation, thus there is a distinction between one-way and twoway information flows in the estimations of the study below. The theoretical reasoning and experimental evidence suggest that the act of information exchange through two-way communication media is more likely to be the source of an information-trust correlation than is information exchange through one-way communication media. 2. Culture Six basic cultures have been defined- Western, Orthodox, Sinic, Hindu, African, and Latin American, as a means of grouping similar countries. The statistics of the study suggest that the mean trust level in Western countries is higher than that in any of the other culture categories. 3. Habit formed during generations of `horizontal networks of association.' Trust develops through horizontal networks of association. Thus imposing a hierarchical structure on society, discourages the formation of this `habit of trust. Thus there exists a negative relation between trust and hierarchy. 4. Urbanization Trust is higher in urban communities than in rural areas. The reason goes as follows: In larger, urban communities, social ties are too weak to effectively blacken a cheater's reputation through word-of-mouth communication. In other words, an individual may act dishonestly for a long time before his reputation catches up with him. By contrast, in a rural village, ostracism is easily facilitated. Thus the regression model in the study has trust as an dependent variable with the independent variables as Information(phones is used as a proxy for the level of two way communication),culture, hierarchy and urbanization(percent of a country's population living in urban areas).Also since phone usage and urbanization are highly correlated, i.e., telephones are a more dominant means of communication in urban areas. Thus the marginal effect of phones on trust is affected by the level of urbanization (URBAN). To account for this effect, we include a PHONES * URBAN interaction terms. The data was collected on the above parameters and regression analysis was done, the results of which are as follows. Trust=0.29+0.012log(GDP)+0.34(phones)-0.009(urban)-0.17(HIER)+.001(Phones*Urban) The regression results support our discussion that information (phones) has a positive relation with trust while urbanization and hierarchical culture has a negative relation with trust.

A STUDY ON TRUST IN INDIA AND SWEDEN It is postulated that higher the level of trust in a country the less corrupt, the more developed and the wealthier its economy will be. A study was conducted to see the effect of trust on the performance of large organizations, measured in terms of government effectiveness, participation in civic organizations, size of the largest firms relative to GNP, and the performance of a society. The findings showed that trust promotes cooperation, especially in large organizations. Yet another study examined the relationship between trust and economic performance across 29 countries and found a strong and significant relationship between economic growth and trust. In the present study, the above proposition is tested by comparing trust and voluntary cooperation between India and Sweden using a one-shot and three-person public goods experiment. In this, participants anonymously choose how much of a given endowment to invest into a public pot. The contributions in the public pot are then multiplied by a positive integer to encourage contribution. Each participant then gets the portion of the endowment he or she does not contribute plus an even split of the public pot. This ends the game. Trust share two properties: risk and interdependence. Risk is the likelihood of potential loss that depends on what others intend to do. Obviously, trust would not be needed if there is complete certainty of the actions that others are going to take. Interdependence means that the gains of one person cannot be achieved without reliance upon others. If participants invest a positive number of tokens, they face the risk of being exploited by free-riders. However, if participants trust each other, and invest positive amounts, all will benefit. Hence, our measure of trust is reflected by the number of tokens participants invest in the public goods game. Sweden is a relatively rich and politically stable country; India has a low income per capita, a high level of political corruption, and high income inequality. Thus according to the above view, Sweden should be a high-trust society and India a low-trust society. Accordingly, the study has tested the hypothesis that participants from Sweden are more trusting and cooperative (i.e., contribute more) in the public goods game than participants from India The experiment was first carried out in Sweden at the School of Management and Economics Vxj University in September 2005. In India the study was done at the Delhi School of Economics, Delhi University in March 2006. A total of 207 undergraduate students in economics participated in the study; 102 Indians and 105 Swedes. Forty-eight percent of the participants in Sweden were men, whereas the corresponding proportion in India was 54%.The mean age for participants was 22 in India and 23 years in Sweden. Results Average contribution by men Average contribution by women Average contribution Standard deviation Median Percentage contributing zero amount Percentage contribution full amount Number of observations India 5.40 4.65 5.00 3.35 5.00 21 16 102 Sweden 6.22 6.46 6.33 3.19 6.00 9 33 105

In line with the hypothesis, the experimental observations revealed that Swedish participants contribute significantly more than Indian participants.

DEMOCRACY AND SOCIAL CAPITAL IN INDIA One of the great achievements of the last decade is that more countries than ever before are democracy. Within the category of consolidated democracy, there is a continuum from low to high quality democracy. An urgent political and economic task is how to improve the quality of democracy. The most widely debated answers offered to the question of how to improve the quality of democracy have been civil society and social capital There is increasing evidence that social capital is the explanation behind the 'high quality' democracy in northern Italy And that decline of social capital in America has negatively affected democracy and political participation. What is social capital? It refers to trust, networks and norms shared by a group of actors that enable them to act together more effectively to pursue shared objectives. It is a resource- .a capital- that consists of the relations you have with other people. The term social does not imply. Socially or politically praiseworthy actions or goals; a party like Shiv Sena also has social capital. Think about a group of underprivileged people - agricultural laborers, pavement dwellers or dalits. If this group of people lives in the same place but does not trust each other, does not know each other and does not have shared norms, it is much less likely to act together against a landlord, a threat of eviction or against oppressive behavior by upper castes. O n the other hand, if the members of such a group trust each other and share norms - in other words, if they have social capital - they can utilize this capital to act collectively Social capital facilitates coordinated action between individuals and is a means of making collective action problem less problematic and also avoids the tragedy of the commons. EVIDENCE FROM AUSTRALIA In the post-independence period, the coastal region of Orissa has been politically and economically more powerful than the inland region. In addition to the regional disparity in development, there is also a marked difference in popular mobilization for environmental protests in these two regions. In the inland part of Orissa, in spite of a larger number of grievances against the government, people do not protest as often as their coastal counterparts. If they protest, they are unable to expand and sustain it for a decisive result. The movements in the inland part primarily fail to gather the momentum due to the failure of different groups coming together.

SOCIAL CAPITAL AND MICROFINANCE


Social capital, such as trust, norms and networks, that can improve the efficiency of society by facilitating coordinated actions," is particularly valuable in low income countries where formal insurance is largely unavailable and institutions for contract enforcement are weak. Since economic theory suggests that repeated interactions among individuals can help build and maintain social capital encouraging interaction could be an effective tool for development policy. Numerous development assistance programs have introduced policies designed to promote social contact among community members thinking that there are significant economic returns to regular interaction. But can simply inducing people to interact more often actually increase economic cooperation? This paper undertakes precisely this exercise in the context of a development program that emphasizes group interaction microfinance. In the typical Grameen Bank"-style microfinance program, clients meet weekly in groups to make loan payments. In addition to facilitating debt collection, these meetings encourage regular interaction among members of highly localized communities. To evaluate the economic returns to increased social contact that result from participation in group lending, we randomly assigned first-time borrower groups of a microfinance institution (MFI) in India to meet either once per week (weekly groups) or once per month. Random variation in the frequency of mandatory meetings across firsttime borrower groups generates persistent changes in clients' social ties. The study shows that the resulting increases in social interaction among clients more than a year later are associated with improvements in informal risk-sharing and reductions in default. A second field experiment among a subset of clients provides direct evidence that more frequent interaction increases economic cooperation among clients. The

results indicate that group lending is successful in achieving low rates of default without collateral not only because it harnesses existing social capital, but also because it builds new social capital among participants. A widely held belief across social scientists in many disciplines is that social interactions encourage norms of reciprocity and trust. In fact, participation in groups is often used to measure an individual's or community's degree of economic cooperation. However, it is not clear from previous work whether the correlation between social distance and trust reflects the causal effect of interaction on economic cooperation. Using field experiments, the study provide evidence that repeat interactions can in practice facilitate cooperative behavior by enabling individuals to sustain reciprocal economic ties. The results also demonstrate that development programs can increase social ties and enhance social capital among members of a highly localized community in a strikingly short amount of time. In the study, close neighbors from similar socio-economic backgrounds got to know each other well enough to cooperate with only the outside stimulus of microfinance meetings. While many studies have suggested a link between social capital and MFI default rates, this is the first study to provide rigorous evidence on the role of microfinance in building social capital. The study suggests potentially large gains from policies which facilitate interaction and help coordinate social capital investments, especially in low income countries where formal risk-sharing arrangements remain limited. By broadening and strengthening social networks the group-based lending model used by MFIs may provide an important impetus for the economic development of poor communities and the empowerment of women. These findings are likely to be most readily applicable to the fast-growing urban and peri-urban areas of cities in developing countries (such as Kolkata) where microfinance is spreading the most rapidly. Other similar development programs or public policies can be designed to enhance the social infrastructure of poor communities

TRUST AND COMMUNITY PARTICIPATION: EXPERIMENTAL EVIDENCE FROM WEST BENGAL


Repeated interactions among the members of a community develops trust among the members and concern for others and willingness to confirm to the prevalent social norms of the community. This in turn leads to community participation and thus the presence of social capital eliminates the transaction cost associated with monitoring and enforcing formal contracts. Members of poor communities in the less developed world often critically depend on such social capital for their survival. For eg. The presence of social capital (trust) helps in the creation of community goods (goods with the characteristics of public goods viz non rival and non excludable). Examples of such community goods may be microfinance groups, providing neighborhood night patrol, management of a local watershed or a protection programme to regenerate a local forest. The question is under what conditions members of a community will come forward to create such a community good The adoption of microfinance schemes in several developing countries and promotion of self-help groups (SHGs), especially under the Swarnajayanti Gram Swarojgar Yojana (SGSY), in rural India to alleviate poverty show the growing importance of development through group formation and collective action. All these utilise the social capital of the community for achieving their specified ojectives Moreover, people living in many developing countries are heavily dependent on agricultural and pastoral activities. These, in turn, are dependent on common property (pool) resources (CPRs) like water for irrigation or common land for grazing. The CPRs provide a safety net for the poor and play an important role in poverty alleviation Some Problems of Community Participation Since these resources are commonly owned and used, there is little private incentive to maintain or regenerate them. Thus the resources are likely to be degraded, further reducing the income base of the poorer section of the population.. This makes the maintenance and management of CPRs a matter of great concern for policymakers working for poverty alleviation. Further, such policies must also address how commons already degraded may be regenerated. In this, community management of CPRs, provides an option In fact there is growing ecidence which shows that village communities have been able to develop stable rules to stop degradation of CPRs and even regenerate them. For instance, DSilva and Nagnath describe how the villagers of Behroonguda in Andhra Pradesh, India, resolved to protect and regenerate the forest

around their village. They provided night patrols in groups to check encroachment of forests and stop timber theft. Also there are examples of more than 17 million rural poor who have formed SHGs and in many such groups, especially in Andhra Pradesh, savings of individual members have crossed Rs 10,000. The objective of this paper is to verify the logic of community participation or collective action under varying experimental conditions using a public goods game. The experiment was conducted in 3 sessions.the first session was conducted with 30 students of an engineering college, the second session with 30 residents of sundarika village in west Bengal. The participants were members of a community-based organisation (CBO), a local club, with some history of community actions like social forestry, environmental awareness campaigns and voluntary blood donation camps. Th last session was conducted at phulbari in sagar island. the participants were five members from six different CBOs located in six different villages. The participants had participated in different social and cultural projects undertaken by their respective CBOs, but have not participated jointly in any earlier project. In all the sessions each participant was provided with an endowment of Rs 50 at the beginning of each treatment and asked to contribute from it towards a group fund, which was to be doubled by the experimenters, and distributed equally among the participants. Thus those who do not contribute keep their initial endowment and also gain an equal share from the common kitty. Thus, for a self-regarding individual the dominant strategy would be to contribute nothing and by symmetry, the total contribution should be zero The first game was without identification in the sense that nobody came to know which person in the group has contributed how much. The next game was with identification but without any punishment. Here the hypothesis was to examine the impact of peer criticism or sense of embarrassment on being revealed a free rider. The third game was to find the impact of pre-play communication on total contribution. This was achieved by announcing a tea break of 20 minutes where subjects were asked to discuss their experience from the earlier rounds in the absence of the investigators. the fourth game was without identification but the contributed money was doubled and donated for purchasing cricket kits for the institute in session , for social forestry in session 2 and game kits for the CBOs in session 3. The findings of the study were as follows: i)under no circumstances was the contribution below 50% of the total endowment and those in session 2 were always higher than in session 1 ii)The results of Game-2 reveal that there is a positive impact of identification (even without any explicit punishment) on group contribution. This may have resulted from tacit threat of peer criticism or from a sense of embarrassment at being revealed a free-rider. In the third game also, we find a positive impact of pre-play communication in all the sessions. In the third game, communication among the participants provided individuals better information about others participation and as a result their perception about others participation has increased. (iii) Finally,from game 4 we find that when contributing for a real project (the returns of which will not be immediately obtained) the villagers show more cooperation than the students do. (iv) even though the participants in session 2 and session 3 have almost identical socio-cultural and economic backgrounds, the participants in session 2 have contributed higher in all the games.This may be attributed to a common bondage with the locality and the community among the participants in the session 2 as they come from the same CBO and have a history of working together in earlier social and cultural projects. But the participants in session 3 were from six different CBOs without any history of working together, consequently, the bondage between the members of the different groups may have been weaker which prevented them from working as a close group. The students were fresher and were from different streams of engineering. As a result, they had little scope of interacting among themselves. Moreover, being city dwellers and exposed to western system of education they may have been influenced by individualistic societal structure. On the other hand, the participants of session 2 were from the same CBO. Repeated interactions and a history of successful cooperation may have helped them to have better perception about others cooperative behaviour, which, in turn, may have resulted in high group contributions. That is, they behaved like a closed homogeneous community.

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