Social trust and income of rural residents: Evidence from China

Abstract

ABSTRACT We examine the relationship between social trust and residential income in rural China by using two microeconomic survey datasets. Social indicators of trust are measured from three dimensions: personalized trust, or trust in relatives and friends; generalized trust, or trust in people other than relatives and friends and public trust, or trust in the state and public officials. Our results show that personalized trust can increase rural residents’ income, while generalized trust may reduce their income. In addition, a significant positive relation is found between public trust and income only in the West and East of China. Three underlying economic mechanisms are also identified: health effects, organizational learning effects, and insurance effects. Furthermore, we empirically assess the impact of the different types of social trust on sources of residential income. The results indicate that personalized trust enhances residents’ financial assets income, generalized trust raises business income, and public trust contributes to salary income.