Does Trust Pay Off?
We exploit a data driven latent class model to classify individuals in two distinct trust classes: one for low, and one for high trust individuals. Subsequently, by entering class membership in a two-wave panel analysis we find that belonging to the high trust class positively influences an individual's economic performance, as measured by individual wage earnings. We show that trust related income differences between and within individuals are robust against endogeneity by suggesting that trust is dependent upon social intelligence. To the best of our knowledge, this is the first time these conclusions have been claimed using micro-level multiple-wave data.
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Volume (Year): 133 (2013)
Issue (Month): 2 ()
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