More Order with Less Law: On Contract Enforcement, Trust, and Crowding.

Trust can increase efficiency in the economic and political spheres. Recent studies using aggregate data suggest the existence of an efficiency-enhancing feature of trust for countries and organizations.(1) We attempt to provide a microfoundation for some of these findings by investigating whether trustworthiness can have an economic payoff at the individual level.

Important domains for trust and trustworthiness include the relationship between representatives and their constituents, such as between politicians and voters, managers and shareholders, or attorneys and clients. In all ...

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