The Development of Trust and Social Capital in Rural Uganda: An Experimental Approach

This paper reports on experiments to understand the determinants of trust in villages in eastern Uganda. It examines whether trust can be built by offering insurance to people to protect against the possibility that the trust they offer will not be reciprocated.

The experiments reveal 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 womens education are added as variables, the wealth effect disappears. Findings include:

• Offer of insurance is taken up by a majority of players, but does not indicate effective demand, in the sense of incentivizing higher levels of trust;
• Effective demand for insurance responds positively to high levels of risk efficacy, microfinance membership, and womens education;
• Insurance offered in this form is on its own not a reliable technology for building trust;
• Effectiveness of insurance as a trust-building instrument appears to increase if complementary institutions are in position;
• Experiential trust may be created by creating institutions in which members have confidence;
• External agents can create incentivized trust if they are able to design incentives which reduce the costs of being exploited.