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Do Trust and Trustworthiness Pay Off?

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Author Info
Joel Slemrod
Peter Katuscak

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Abstract

Are individuals who trust others better off than those who do not? Do trustworthy people prosper more than untrustworthy ones? We first pose these questions in a search model where individuals face repeated choices between trusting (initiating an investment transaction) and not trusting, and between being trustworthy (not stealing the investment) and cheating. We then derive predictions for the relationship between observed individual behavior, aggregate attitudes, and individual prosperity. Finally, we evaluate these predictions empirically using household-level data for eighteen (mostly developed) countries from the World Values Survey. We find that, on average, a trusting attitude has a positive impact on income, while trustworthiness has a negative impact on income. In addition, we find evidence of complementarity between these two attitudes and the aggregate levels of the complementary attitudes. Most strikingly, the payoff to being trustworthy depends positively on the aggregate amount of trust in a given country.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9200.

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Date of creation: Sep 2002
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Handle: RePEc:nbr:nberwo:9200

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Find related papers by JEL classification:
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
H40 - Public Economics - - Publicly Provided Goods - - - General

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  1. Ashraf, Nava & Bohnet, Iris & Piankov, Nikita, 2003. "Is Trust a Bad Investment?," Working Paper Series rwp03-047, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  2. Abigail Barr & Pieter Serneels, 2004. "Wages and Reciprocity in the Workplace," Development and Comp Systems 0409064, EconWPA. [Downloadable!]
  3. Johansson-Stenman, Olof, 2006. "Who Are the Trustworthy, We Think?," Working Papers in Economics 222, Göteborg University, Department of Economics. [Downloadable!]
    Other versions:
  4. Breuer, Janice Boucher & McDermott, John, 2009. "Trustworthiness and economic performance," MPRA Paper 16777, University Library of Munich, Germany. [Downloadable!]
  5. Helmut Rainer & Thomas Siedler, 2006. "Does Democracy Foster Trust? Evidence from the German Reunification," Economics Discussion Papers 613, University of Essex, Department of Economics. [Downloadable!]
  6. Helmut Rainer & Michael Siedler, 2006. "Does democracy foster trust?," Discussion Paper Series, Department of Economics 0602, Department of Economics, University of St. Andrews. [Downloadable!]
    Other versions:
  7. Hong, Kesseley & Bohnet, Iris, 2004. "Status and Distrust: The Relevance of Inequality and Betrayal Aversion," Working Paper Series rwp04-041, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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