Organization.
Abstract Social capital appears to have significant
consequences for economic development, yet we know little about how
social capital develops or the role of government institutions in
promoting or hindering that development. The two key approaches to
social capital, as civic engagement or as generalized trust, are
combined in a single model focusing on the role of contract
enforcement in their development. Contract enforcement is shown to
have nonmonotonic effects on civic engagement, generating
nonmonotonic effects on the evolution of generalized trust. In
particular, moderate levels of contracting institutions may
crowd-in civic engagement and trust, whereas high levels of
contracting institutions have the opposite effect. Furthermore, the
model generates a low-trust trap in which contracting institutions
are ineffective at promoting civic engagement or trust.