Trust Preferences in Rural Jambi

In the absence of formal institutions trust plays an important role in economic decisions: on the one hand it is associated with higher efficiency as it reduces transaction and monitoring costs. On the other hand it implies lower risks of defaulting partnerships and cooperation. Trust is a flexible trait. In specific, it depends on individual characteristics, norms and values, but can also vary with changing expectations and circumstances. Sumatra is especially interesting to study since it has been subject to the government-led relocation program that created whole new villages of people of different ethnicities and from different parts of Indonesia to foster palm oil and rubber plantation.
In this paper we want to examine determinants affecting trust in rural households of Jambi Province, Sumatra, by combining experimental and survey data. We randomly selected 925 individuals from 98 villages in rural Jambi. The participants were invited to an economic experiment to elicit their trust preferences. Additionally, a survey was conducted to collected socio-economic data, including trust questions as formulated in the well-known World Value Survey. In doing so, we are able to compare individual trust behaviour to self-reported trust in the survey.