Competition Builds Trust
AbstractThis paper shows that (firm-level) competition has a positive impact on (individual-level) trust. Using US statesâ€™ banking de-regulation from the mid 1970s, we first show that an increase in competition had a causal impact on trust, measured in the General Social Survey (GSS). We develop a model which explains why increased competition within a state increases trust. The model also predicts a positive correlation between trust and sectoral competitiveness in the cross-section. We explore this implication using the 2004 wave of the GSS which we match with US census of firms competition measures. The modelâ€™s predictions are strongly borne out.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Economics working papers with number patrick_francois-2009-65.
Length: 38 pages
Date of creation: 02 Dec 2009
Date of revision: 02 Dec 2009
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Web page: http://www.economics.ubc.ca/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-BEC-2009-12-19 (Business Economics)
- NEP-SOC-2009-12-19 (Social Norms & Social Capital)
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- Luigi Guiso, 2012. "Trust & Insurance Markets," EIEF Working Papers Series 1207, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2012.
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