Learning to Trust: From Relational Exchange to Generalized Trust in China

Abstract

Where does generalized trust—that is, the inclination to place trust in strangers—come from? Our claim is that in economic action, sources of generalized trust may not differ much from the sources of personalized trust. Contrary to a common assumption of a sharp distinction between personalized and generalized trust, we assert a likely spillover effect from relational exchange to a person’s expectations in interacting with an anonymous other. Our research integrates behavioral measures elicited by a novel incentivized trust game with survey data using a random sample of 540 entrepreneurs of private industrial firms in the Yangzi delta region of China. We show that entrepreneurs with more experience in relational exchange display greater trust in strangers. Likewise, we find robust evidence of a positive association between beliefs in the effectiveness of community business norms and generalized trust.