The Market-Promoting and Market-Preserving Role of Social Trust in Reforms of Policies and Institutions

Abstract

Social trust has been identified as a catalyst for reforms. We take the literature further in two ways. First, we analyze mechanisms through which social trust enables liberalizing reforms—by overcoming obstacles in the political process (stemming from ideology, ideological fractionalization, coalition government, minority government, and legislature‐seat instability). Second, we define reforms as distinct changes in the quality of the legal institutions and in the scope of regulation and separate reforms that increase economic freedom in these two areas from reforms that decrease it. We study separately how social trust, interacted with the different types of political hindrances, affects the probability of reforms. We find a dual role of social trust in the political process—facilitating liberalizing reforms and making deliberalizing ones more difficult. This suggests that trust does not make agreement on any reform more probable—the content of the reform is crucial.

Is constitutionalized media freedom only window dressing? Evidence from terrorist attacks

“…In addition, we include a dummy for whether a terrorist attack occurred during a parliamentary election year, as governments might be particularly sensitive to critical media reports when they are trying to be re-elected. 12 We derive those observations from the background database of Berggren and Bjørnskov (2017) and add a set of regime fixed effects from Bjørnskov and Rode's (in De facto mf it+1 = a + b * terror it + c * de jure mf it + d * de jure JI it + e * allowance it + f * X it + g * D i + h * I t + u it press) update of Cheibub et al (2010), thereby capturing differences between parliamentary, weak presidential, and fully presidential democracies, and civilian autocracies, military dictatorships and absolutist monarchies.…”

“…The measure of government ideology is based onBerggren and Bjørnskov's (2017) categorization of all parties in parliament into five groups: communist/unreformed socialist parties with scores of − 1, reformed or modern socialist parties with scores of − 0.5, modern social democrats and non-ideological parties…”

Radical Distrust: Are Economic Policy Attitudes Tempered by Social Trust?

“…Social trust stimulates coordination and cooperation, making mutual agreements of opposing groups on divisive issues feasible (Boix & Posner 1998). Societies with high social trust are more likely to overcome political stalemate and conflict (Heinemann & 3 Tanz 2008, Leibrecht & Pitlik 2015, Berggren & Bjørnskov 2017. Trust thus facilitates the operation of institutions conducive to growth and good governance.…”

Do voters dislike liberalizing reforms? New evidence using data on satisfaction with democracy

“…We next follow the main approach of Berggren and Bjørnskov (2017) to identify reforms, using dummy variables. The idea is to look at distinct, substantial changes in the four indicators of economic freedom and not just any continuous change.…”

“…We moreover include a set of control variables, capturing economic circumstances, political institutions and features of politics. More specifically, we employ a baseline that includes the lagged annual growth rate of GDP per capita, a dummy for crisis or recession (coded as one in all years in which growth is negative), both coded on the basis of PPP-adjusted GDP data from World Bank (2017); and government ideology, the Herfindahl index of the legislature and a dummy for minority government, which we all take from Berggren and Bjørnskov (2017). In further tests, we also include the inflation rate, the rate of unemployment -both from World Bank (2017) -and the Gini coefficient of net income inequality from the fifth edition of the SWIID database (Solt, 2009).…”