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Competition Builds Trust

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Author Info

  • Francois, Patrick
  • Fujiwara, Thomas
  • van Ypersele, Tanguy

Abstract

This paper shows that (firm-level) competition has a positive impact on (individual-level) trust. Using US states’ 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 model’s predictions are strongly borne out.

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Bibliographic Info

Paper provided by Vancouver School of Economics in its series Economics working papers with number patrick_francois-2009-65.

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Length: 38 pages
Date of creation: 02 Dec 2009
Date of revision: 02 Dec 2009
Handle: RePEc:ubc:bricol:patrick_francois-2009-65

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Web page: http://www.economics.ubc.ca/

Related research

Keywords: Trust;

This paper has been announced in the following NEP Reports:

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Cited by:
  1. 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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