The development of trust and social capital in rural Uganda: an experimental approach

Trust is important for development but can be hard to build. In this paper, we report on experiments designed to understand the determinants of trust in villages in eastern Uganda, and in particular whether trust can be ‘built’ by offering insurance to people as a protection against the possibility that the trust they offer will not be reciprocated. We find, firstly, that the effects of income and wealth on trust are ambiguous: trust is higher in the richer than the poorer village, but once association and female education are added as explanatory variables, the wealth effect disappears. Secondly, although the offer of insurance is taken up by a majority of players, this is in most cases not an ‘effective demand’ in the sense of incentivising higher levels of trust. Effective demand for insurance, defined in this way, however responds positively to high levels of risk efficacy, microfinance membership and female education. Insurance offered in this form, therefore, is by no means a reliable technology for building trust; but its effectiveness as a trust-building instrument appears to increase if certain complementary institutions are in position. JEL classification numbers: O12, O16, C93