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Trust, Confidence and Economic Growth An Evaluation of the Beugelsdijk Hypothesis

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  • Benjamin Volland

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    (Max Planck Institute of Economics, Jena, Germany)

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    Abstract

    This paper analyses the hypothesis that the robust relationship between trust - as measured by the World Values Survey's question "In general, do you think that most people can be trusted, or that you can't be too careful in dealing with people?" - and economic growth, established by empirical macroeconomic growth literature (Knack & Keefer, 1997; Zak & Knack, 2001; Beugelsdijk, de Groot, & van Schaik, 2004; Dearmon & Grier, 2009) in fact captures the well-functioning of institutions. Our results reveal that the correlation between trust and economic growth is robust in terms of statistical significance and sign of the estimated coefficient, when controling for the respondents' perceived well-functioning of institutions. While underlining the existing empirical evidence that trust matters in explaining differences in economic performance, our results also show that this influence is largely independent of institutional well-functioning.

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    Bibliographic Info

    Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-080.

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    Date of creation: 15 Nov 2010
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    Handle: RePEc:jrp:jrpwrp:2010-080

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    Keywords: Trust; Institutions; Economic growth;

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