Markets can only function properly in the presence of sufficient trust. We explore the relation between trusting behavior and market integration in rural China. We link the results of a trust experiment to actual behavior in the field (participation in the labor market versus informally exchanging labor), and find that high-trust households are more likely to use formal markets. We proceed by exploring the relation between labor market participation and economic outcomes, finding tentative evidence of a causal relation running from market participation to higher levels of income.
Key words: trust game, economic behavior, labor exchange, labor market participation
TU, Qin and Erwin Bulte , Trust, Market Participation and Economic Outcomes: Evidence from Rural China, World Development, 38(8): 1179-1190