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The productivity of trust

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  • Christian Bjørnskov
  • Pierre-Guillaume Méon

Abstract

This paper returns to one of the early questions of the literature on social trust, whether trust affects total factor productivity (TFP). Using both development and growth accounting, we find strong evidence of a causal effect of trust on the level and growth of TFP. Using a three-stage least-squares procedure, we moreover observe that the effect of trust on TFP runs entirely through property-rights institutions and not political institutions. Those findings resist a series of robustness checks.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/61225/1/wp10042.pdf
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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 10-042.

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Length: 77 p.
Date of creation: Aug 2010
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/61225

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Keywords: Total factor productivity; Social trust;

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References

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  1. Berggren, Niclas & Jordahl, Henrik, 2005. "Free to Trust? Economic Freedom and Social Capital," Working Paper Series 2005:2, Uppsala University, Department of Economics.
  2. Berggren, Niclas & Bergh, Andreas & Bjørnskov, Christian, 2009. "The growth effects of institutional instability," Working Papers 2009:8, Lund University, Department of Economics.
  3. Friedrich Heinemann & Benjamin Tanz, 2008. "The impact of trust on reforms," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 11(3), pages 173-185.
  4. Paola Sapienza & Anna Toldra & Luigi Zingales, 2007. "Understanding Trust," NBER Working Papers 13387, National Bureau of Economic Research, Inc.
  5. Niclas Berggren & Mikael Elinder, 2012. "Is tolerance good or bad for growth?," Public Choice, Springer, vol. 150(1), pages 283-308, January.
  6. Lassen, David Dreyer, 2007. "Ethnic divisions, trust, and the size of the informal sector," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 423-438, July.
  7. Dearmon, Jacob & Grier, Kevin, 2009. "Trust and development," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 210-220, August.
  8. Sjoerd Beugelsdijk, 2006. "A note on the theory and measurement of trust in explaining differences in economic growth," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 371-387, May.
  9. Abu-Qarn, Aamer S. & Abu-Bader, Suleiman, 2007. "Sources of Growth Revisited: Evidence from Selected MENA Countries," World Development, Elsevier, vol. 35(5), pages 752-771, May.
  10. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2002. "Trust and Economic Growth," Tinbergen Institute Discussion Papers 02-049/3, Tinbergen Institute.
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Cited by:
  1. Kodila-Tedika, Oasis & Agbor Agbor, Julius, 2012. "Does Trust Matter For Entrepreuneurship : Evidence From A Cross-Section Of Countries," MPRA Paper 42292, University Library of Munich, Germany.

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