Passing the buck!—how credible are self-reported measures of confidence in public institutions?

Measures of confidence in public institutions are self-reported and therefore, susceptible to heterogeneity arising out of individual perceptions. In this article, I explore the possibility of individuals reporting lower levels of confidence in public institutions depending on their personal economic conditions, for which these institutions cannot be solely held responsible. Using nationally representative Indian data, I exploit exogenous sources of indebtedness in an instrumental variables regression approach to identify the causal effects of personal economic hardships on confidence in public institutions. The identification strategy relies on exogenous variation in the measure of indebtedness generated by a large monetary loss arising out of natural calamities such as accident, fire, or drought. I find that estimated coefficients from two-stage least square regressions are negative and statistically significant suggesting that an increase in indebtedness is associated with an erosion in confidence measures.