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Trust and growth: a shaky relationship

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  • Niclas Berggren
  • Mikael Elinder
  • Henrik Jordahl

Abstract

We conduct an extensive robustness analysis of the relationship between trust and growth by investigating a later time period and a bigger sample than in previous studies. In addition to robustness tests that focus on model uncertainty, we systematize the investigation of outlier influence on the results by using the robust estimation technique Least Trimmed Squares. We find that when outliers (especially China) are removed, the trust-growth relationship is no longer robust. On average, the trust coefficient is half as large as in previous findings.
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Suggested Citation

  • Niclas Berggren & Mikael Elinder & Henrik Jordahl, 2008. "Trust and growth: a shaky relationship," Empirical Economics, Springer, vol. 35(2), pages 251-274, September.
  • Handle: RePEc:spr:empeco:v:35:y:2008:i:2:p:251-274
    DOI: 10.1007/s00181-007-0158-x
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    More about this item

    Keywords

    Trust; Growth; Robustness; Social capital; Outliers; O40; Z13;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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