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The Role of Government and Trust in the Market Economy

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  • Nadja König
  • Ludger Schuknecht

Abstract

This paper studies the role of governments and its link to trust. We argue that the public’s trust strongly depends on governments delivering on their core tasks in a market economy. In some economies, a neglect of core tasks can be observed and there seems to be some erosion, notably in terms of securing sound rules of the game in industrialised countries. We find very little correlation between government expenditure and trust but a strong correlation with delivering on core tasks. This leads us to conclude that it is not government spending per se that needs to increase to build trust, but rather better focused government activities.

Suggested Citation

  • Nadja König & Ludger Schuknecht, 2018. "The Role of Government and Trust in the Market Economy," CESifo Working Paper Series 6997, CESifo.
    • Handle: RePEc:ces:ceswps:_6997
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    References listed on IDEAS

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    Cited by:

    1. Marè, Mauro & Motroni, Antonello & Porcelli, Francesco, 2020. "How family ties affect trust, tax morale and underground economy," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 235-252.

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    More about this item

    Keywords

    role of government; public goods; trust in government; quality of public finances;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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