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Regulation and Distrust

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  • Pierre Cahuc

    (Department of Economics, Ecole Polytechnique)

  • Andrei Shleifer

    (Department of Economics, Harvard University)

  • Philippe Aghion

    (Department of Economics, Harvard University)

  • Yann Algan

    (Département d'économie)

Abstract

In a cross-section of countries, government regulation is strongly negatively correlated with social capital. We document this correlation, and present a model explaining it. In the model, distrust creates public demand for regulation, while regulation in turn discourages social capital accumulation, leading to multiple equilibria. A key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt. We test this and other implications of the model using country- and individual-level data on social capital and beliefs about government’s role, as well as on changes in beliefs and in trust during the transition from socialism.

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Bibliographic Info

Paper provided by Sciences Po in its series Sciences Po publications with number 14648.

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Date of creation: Jan 2009
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Handle: RePEc:spo:wpmain:info:hdl:2441/8883

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  32. repec:spo:wpecon:info:hdl:2441/8814 is not listed on IDEAS
  33. Carlin, Bruce Ian & Dorobantu, Florin & Viswanathan, S., 2009. "Public trust, the law, and financial investment," Journal of Financial Economics, Elsevier, Elsevier, vol. 92(3), pages 321-341, June.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Links 1/2/2011
    by Liam Delaney in Geary Behaviour Centre on 2011-02-01 15:43:00
  2. Regulation, distrust, morale, intrinsic and extrinsic motivation
    by Nicholas Gruen in Club Troppo on 2009-01-19 03:49:08
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