Advanced Search
MyIDEAS: Login to save this paper or follow this series

Does trust favor macroeconomic stability?

Contents:

Author Info

  • Marc Sangnier

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Abstract

This paper investigates the relationship between trust and macroeconomic volatility. In a cross section of countries, we show that higher trust is associated with lower macroeconomic instability. We use the inherited trust of Americans as an instrumental variable of trust in their origin country to overcome all potential reverse causality concerns. We use changes in inherited trust over the XXth century to show that increasing trust also decreases volatility across time. Thus, trust is shown to be an important determinant of macroeconomic stability both in space and time. Finally, we show that trust reduces investment volatility but not public expenditure volatility.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://halshs.archives-ouvertes.fr/docs/00/57/50/21/PDF/wp200940.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00575021.

as in new window
Length:
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:hal:psewpa:halshs-00575021

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00575021
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: social capital ; trust ; volatility ; macroeconomic stability;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," CESifo Working Paper Series 2236, CESifo Group Munich.
  2. Alessandra Fogli & Raquel Fernandez, 2005. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 05-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," Research Papers, Stanford University, Graduate School of Business 1751r, Stanford University, Graduate School of Business.
  4. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, MIT Press, MIT Press, vol. 8(4), pages 677-716, 06.
  5. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
  6. Marc Sangnier, 2011. "The co-evolution of social capital and financial development," PSE Working Papers halshs-00585008, HAL.
  7. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Social Capital as Good Culture," NBER Working Papers 13712, National Bureau of Economic Research, Inc.
  8. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(3), pages 1015-1049, August.
  9. Fernández, Raquel & Fogli, Alessandra, 2005. "Fertility: The Role of Culture and Family Experience," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5221, C.E.P.R. Discussion Papers.
  10. Aghion, Philippe & Angeletos, George-Marios & Banerjee, Abhijit & Manova, Kalina, 2010. "Volatility and growth: Credit constraints and the composition of investment," Scholarly Articles 12490636, Harvard University Department of Economics.
  11. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(2), pages 211-48, April.
  12. Dani Rodrik, 1998. "Where Did All The Growth Go? External Shocks, Social Conflict, and Growth Collapses," NBER Working Papers 6350, National Bureau of Economic Research, Inc.
  13. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & Jürgen Schupp & Gert G. Wagner, . "A Nation-Wide Laboratory: Examining trust and trustworthiness by integrating behavioral experiments into representative surveys," IEW - Working Papers 141, Institute for Empirical Research in Economics - University of Zurich.
  14. Daron Acemoglu & Simon Johnson & James Robinson & Yunyong Thaicharoen, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," NBER Working Papers 9124, National Bureau of Economic Research, Inc.
  15. Giuliano, Paola & Spilimbergo, Antonio, 2009. "Growing Up in a Recession: Beliefs and the Macroeconomy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7399, C.E.P.R. Discussion Papers.
  16. Oguzhan Dincer & Eric Uslaner, 2010. "Trust and growth," Public Choice, Springer, Springer, vol. 142(1), pages 59-67, January.
  17. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Alfred Marshall Lecture Social Capital as Good Culture," Journal of the European Economic Association, MIT Press, MIT Press, vol. 6(2-3), pages 295-320, 04-05.
  18. Paola Sapienza & Anna Toldra & Luigi Zingales, 2007. "Understanding Trust," NBER Working Papers 13387, National Bureau of Economic Research, Inc.
  19. Thöni, Christian & Tyran, Jean-Robert & Wengström, Erik, 2012. "Microfoundations of social capital," Journal of Public Economics, Elsevier, Elsevier, vol. 96(7-8), pages 635-643.
  20. Wacziarg, Romain & Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio, 2002. "Fractionalization," Research Papers, Stanford University, Graduate School of Business 1744, Stanford University, Graduate School of Business.
  21. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  22. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 100(5), pages 2060-92, December.
  23. Nejat Anbarci & Jonathan Hill & Hasan Kirmanoglu, 2011. "Institutions and Growth Volatility," Economic Papers, The Economic Society of Australia, The Economic Society of Australia, vol. 30(2), pages 233-252, 06.
  24. Daron Acemoglu & Simon Johnson & Pablo Querubin & James A. Robinson, 2008. "When Does POlicy Reform Work? The Case of Central Bank Independence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 351-429.
  25. Aghion, Philippe & Askenazy, Philippe & Berman, Nicolas & Cette, Gilbert & Eymard, Laurent, 2012. "Credit Constraints and the Cyclicality of R&D Investment: Evidence from France," Scholarly Articles 12490632, Harvard University Department of Economics.
  26. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1203-50, November.
  27. Miklos Koren & Silvana Tenreyro, 2005. "Volatility and Development," CEP Discussion Papers dp0706, Centre for Economic Performance, LSE.
  28. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  29. Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1847, Harvard - Institute of Economic Research.
  30. repec:hal:wpaper:halshs-00585008 is not listed on IDEAS
  31. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1138-51, December.
  32. Aghion, Philippe & Angeletos, George-Marios & Banerjee, Abhijit & Manova, Kalina, 2010. "Volatility and growth: Credit constraints and the composition of investment," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(3), pages 246-265, April.
  33. Paola Sapienza & Luigi Zingales & Luigi Guiso, 2006. "Does Culture Affect Economic Outcomes?," NBER Working Papers 11999, National Bureau of Economic Research, Inc.
  34. Nunn, Nathan & Wantchekon, Leonard, 2011. "The Slave Trade and the Origins of Mistrust in Africa," Scholarly Articles 11986331, Harvard University Department of Economics.
  35. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Trust in Large Organizations," NBER Working Papers 5864, National Bureau of Economic Research, Inc.
  36. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2000. "The Role of Social Capital In Financial Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2383, C.E.P.R. Discussion Papers.
  37. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  38. Francois, P. & Zabojnik, J., 2003. "Trust, Social Capital and Economic Development," Discussion Paper, Tilburg University, Center for Economic Research 2003-116, Tilburg University, Center for Economic Research.
  39. Francois, Patrick, 2008. "Norms and Institution Formation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6735, C.E.P.R. Discussion Papers.
  40. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1251-88, November.
  41. Gertler, Mark & Kiyotaki, Nobuhiro, 2010. "Financial Intermediation and Credit Policy in Business Cycle Analysis," Handbook of Monetary Economics, Elsevier, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 11, pages 547-599 Elsevier.
  42. Carroll, Christopher D & Rhee, Byung-Kun & Rhee, Changyong, 1994. "Are There Cultural Effects on Saving? Some Cross-Sectional Evidence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 685-99, August.
  43. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(470), pages 295-321, April.
  44. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, American Economic Association, vol. 81(5), pages 1146-55, December.
  45. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Giacomo, Degli Antoni & Fabio, Sabatini, 2013. "Disentangling the relationship between nonprofit and social capital: the role of social cooperatives and social welfare associations in the development of networks of strong and weak ties," MPRA Paper 44860, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:psewpa:halshs-00575021. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.