The Journal of Socio-Economics 40 (2011) 833–843 Contents lists available at SciVerse ScienceDirect The Journal of Socio-Economics journal homepage: www.elsevier.com/locate/soceco Trust, tenure insecurity, and land certification in rural Ethiopia Mintewab Bezabih a,∗ , Gunnar Kohlin b , Andrea Mannberg c a CEMARE, University of Portsmouth, United Kingdom b Environmental Economics Unit, University of Gothenburg, Sweden c Department of Economics, Umea University, Sweden article info Article history: Received 19 November 2010 Received in revised form 13 July 2011 Accepted 29 August 2011 JEL classification: D2 Q12 Q15 Keywords: Trust Land certification Interpersonal and institutional trust Difference-in-difference method abstract This paper assesses the impact of a land certification program in Ethiopia on the level of interpersonal and institutional trust among households in the Amhara region. The land certification program is designed to enhance land tenure security of farmers, by maintaining (egalitarian) status quo land distribution and equity concerns. The major contribution of the analysis lies in the exogenous nature of the program which addresses the endogeneity problems that characterize related studies, assessing the impact of policy related variables on trust. The effects of the land certification program on trust are identified both by the difference-in-difference approach and by non-parametrical analysis of average treatment effects. Overall trust is found to be enhanced by the certification program, with trust towards formal institutions being more responsive to the program than interpersonal trust. The major policy implication of the result is that trust could be invested on through policy changes regarding the economic betterment of societies. Crown Copyright © 2011 Published by Elsevier Inc. All rights reserved. 1. Introduction Formal and informal contracts, to a large extent, form the basis for social interactions on both the individual level and on more aggregate levels in society. Regardless of the degree of formal- ity, these contracts facilitate social interaction in terms of defining both rights and liabilities. However, in many cases it is not possible to postulate a contract that is complete in terms of enforceabil- ity without costly monitoring. Because of this, the realization of many of the possible gains from exchange and market interactions requires trust and reciprocity (Fehr et al., 1997). Indeed, there is now extensive evidence that trust is crucial for fostering coopera- tion among people, and that trustful relations reduce transaction costs within day to day economic interactions (e.g., Teraji, 2008). Such facilitative roles of trust have been shown to translate into desirable social and economic outcomes at the individual level (e.g. Gabre-Madhin, 2001) and national/societal levels (e.g. Putnam, 1993; Fukuyama, 1995; Knack and Keefer, 1997; Teraji, 2008). 1 ∗ Corresponding author at: Department of Economics, University of Sussex, BN1 9RH, United Kingdom. Tel.: +44 (0) 1273 872628; fax: +44 (0) 1273 678335. E-mail addresses: M.bezabih@sussex.ac.uk (M. Bezabih), Gunnar.kohlin@economics.gu.se (G. Kohlin), Andrea.mannberg@econ.umu.se (A. Mannberg). 1 The term “social trust” (generalized interpersonal trust) should be distinguished from “political trust” (confidence in political and public institutions). Social trust, as “generalized thin trust,” also should be distinguished from trust embedded in personal relations, or “particularized thick trust” (You, 2005). Given its pivotal importance in acting as a lubricant in exchange and other activities of economic importance, assessment of the determinants of trust has received considerable attention from both experimental and field research (e.g., You, 2005; Cox et al., 2009). Over time, two major strands of literature have emerged. The first strand relates to trust as a cultural and moral feature, while the second relates to trust as an incentive driven motive responsive to institutional and policy measures (Bjørnskov, 2005). 2 While determinants of trust associated with cultural or moral features are exogenous, assessing the impact of policy related vari- ables on trust have been dogged by possible endogeneity of the measures. For instance, democratic societies with fair procedural rules, fair administration of rules with freedom from corruption and fair income distribution, are likely to produce incentives for trust- worthy behavior, develop norms of trustworthiness and enhance interpersonal trust (You, 2005). Similarly, secure property rights could be the outcome of collective trust (Teraji, 2008). Given such plausible endogeneities, assessment of causal relationships between trust and policy related variables may yield misleading 2 Determinants of trust related to non-policy variables include measures of frac- tionalization regarding ethnic or ethno-linguistic diversity (Knack and Keefer, 1997; Zak and Knack, 2001; Knack and Zak, 2002; Uslaner, 2002; Bjørnskov, 2005), political diversity (Bjørnskov, 2006) and religion (La Porta et al., 1997; Zak and Knack, 2001; Uslaner, 2002). Policy related factors affecting trust include the rule of law (Zak and Knack, 2001), economic freedom and democracy, political trust (Brehm and Rahn, 1997) and education (Knack and Keefer, 1997; Knack and Zak, 2002), among others. 1053-5357/$ – see front matter. Crown Copyright © 2011 Published by Elsevier Inc. All rights reserved. doi:10.1016/j.socec.2011.08.015