Trust and growth: a shaky relationship

Abstract

We conduct an extensive robustness analysis of the relationship between trust and growth by investigating a later time period and a bigger sample than in previous studies. In addition to robustness tests that focus on model uncertainty, we systematize the investigation of outlier influence on the results by using the robust estimation technique Least Trimmed Squares. We find that when outliers (especially China) are removed, the trust-growth relationship is no longer robust. On average, the trust coefficient is half as large as in previous findings.

Trust and Prosperity: A Conditional Relationship

“…Deviating from 'inherited initial levels of trust, Roth (2009) has also concluded that from a policy point of view, an increase in trust is crucial for countries with low levels of trust, but can likely be neglected by countries with sufficient levels of trust and may even hamper economic performance in countries with high levels of trust. This paper contributes to existing literature along two main axes: complementing existing literature and extending Berggren et al (2008). Firstly, it complements recent literature in a twofold manner by: focusing on 'growth thresholds' instead of 'trust thresholds' and; investigating the Roth (2009) hypothesis: "The common knowledge which has governed the nature of discussions in social science and economics of the last ten years, that trust is generally positively related to economic performance, must be seriously questioned" (p. 1).…”

“…Secondly, their study does not control for the plethora of cultural and social unobserved heterogeneity recently documented in the trust-growth literature (Uslaner, 2008;Tabellini, 2008;Algan & Cahuc 2010). Thirdly, the dataset used is significantly different from the Berggren et al (2008) dataset which we intend to use.…”

“…Accordingly, the use of the quantile regression estimation technique enables us to assess how growth thresholds matter in the Roth hypothesis. Secondly, we extend Berggren et al (2008) by using a methodology that is robust in the presence of outliers. The extension of Berggren et al (2008) has a twofold motivation.…”

“…Secondly, we extend Berggren et al (2008) by using a methodology that is robust in the presence of outliers. The extension of Berggren et al (2008) has a twofold motivation. (1) By using quantile regression, we are able to assess the robustness of the findings from another methodology underpinning.…”

Social Trust and Social Network in Iran

“…On the collective level, if you don't trust an agency or organization with which the individual is affiliated, you will not trust him to fulfill an agreement [24]. Some studies of trust have focused on economic growth [25]- [27], [12] and institutional development [28]- [30]. Bjørnskov [31] shows that there is significant correlation between social trust and life satisfaction in country-level regressions, and similarly, Bjørnskov [32] finds significant links in US state-level regressions.…”