The Economic Origins of Trust: Evidence from Mobile Pastoralism

Abstract: We examine the hypothesis from anthropology that the economic requirements of mobile pastoralism made pastoralists highly interdependent within groups but hostile to individuals beyond the radius of extended kin. We find that historical reliance on mobile pastoralism led to the emergence of in-group oriented and family-centered individuals. Specifically, mobile pastoralism explains part of the contemporary variation in in-group relative to out-group trust. This result is valid across countries, between residents of the same country, among second-generation migrants and with an instrumental variable strategy. We also examine the implications of this cultural trait for cooperation and firm development. In a quasi-experimental setting, we find that individuals from mobile pastoralist groups are perceived as more hostile and suspicious. Additionally, we find that greater reliance on mobile pastoralism is associated with less objective promotion criteria within firms and smaller firm size, suggesting that in-group trust bias may affect firm development. This paper contributes to our understanding of how forms of economic production shape the scope and extent of trust.