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Trust, Honesty and Regulations

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Author Info
Pinotti, Paolo

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Abstract

This paper investigates the importance of cultural traits for understanding the causes and consequences of government intervention in the economy. First, it presents a simple model in which, under reasonable assumptions about the structure of the economy and the individual values and beliefs, more trustful individuals prefer lower product market regulation. This theoretical prediction is supported by evidence from international survey data. Second, it shows that, if trust predicts trustworthiness across countries, lower honesty would drive both greater regulation and higher incidence of illegal activities. It follows that some of the negative effects usually associated with government intervention may indeed be a consequence of underlying cultural traits. In particular, evidence from cross-country data suggests that a large part of the effect of regulation on corruption and unofficial activity estimated in previous studies can be attributed to omitted variation in trust and honesty.

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File URL: http://mpra.ub.uni-muenchen.de/7740/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7740.

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Date of creation: Mar 2008
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Handle: RePEc:pra:mprapa:7740

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Related research
Keywords: trust honesty regulations corruption unofficial economy

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Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
Z10 - Other Special Topics - - Cultural Economics - - - General
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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References listed on IDEAS
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  1. Clarete, Ramon & Edmonds, Christopher & Wallack, Jessica Seddon, 2003. "Asian regionalism and its effects on trade in the 1980s and 1990s," Journal of Asian Economics, Elsevier, vol. 14(1), pages 91-129, February. [Downloadable!] (restricted)
  2. Schartinger, Doris & Schibany, Andras & Gassler, Helmut, 2001. " Interactive Relations between Universities and Firms: Empirical Evidence for Austria," The Journal of Technology Transfer, Springer, vol. 26(3), pages 255-68, June. [Downloadable!] (restricted)
  3. O G Dayaratna Banda & John Whalley, 2005. "Beyond Goods and Services: Competition Policy, Investment, Mutual Recognition, Movement of Persons, and Broader Cooperation Provisions of Recent FTAs involving ASEAN Countries," NBER Working Papers 11232, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Roberto Fontana & Aldo Geuna & Mireille Matt, 2003. "Firm Size and Openness: the Driving Forces of University-Industry Collaboration," SPRU Electronic Working Paper Series 103, University of Sussex, SPRU - Science and Technology Policy Research. [Downloadable!]
  5. James D. Adams & Eric P. Chiang & Katara Starkey, 2000. "Industry-University Cooperative Research Centers," NBER Working Papers 7843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Ron Martin & Peter Sunley, 2002. "Deconstructing Clusters: Chaotic Concept or Policy Panacea," ESRC Centre for Business Research - Working Papers wp244, ESRC Centre for Business Research. [Downloadable!]
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This page was last updated on 2008-11-18.

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