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Does Too Much Trust Hamper Economic Growth?

In: Intangible Capital and Growth

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  • Felix Roth

    (University of Hamburg)

Abstract

This contribution examines the relationship between trust and economic growth. Taking panel data and using a fixed-effects estimation for a 41-country sample over the time period from1980 to 2004 and with a total of 129 observations, tis points out that economic growth is negatively related to an increase in trust. This negative finding is in contrast to most empirical findings using a cross-sectional design. The common knowledge which has governed the nature of discussions in the social sciences and economics for the last 10 years, namely that trust is generally positively related to economic performance, must be seriously questioned. From a policy point of view, an increase in trust is crucial for countries with low levels of trust, but can likely be neglected by countries with sufficient levels of trust and may even hamper economic performance in countries with high levels of trust. The relationship is tested in the context of EU countries, OECD countries, and developing countries. Interpersonal trust and systemic trust are differentiated.

Suggested Citation

  • Felix Roth, 2022. "Does Too Much Trust Hamper Economic Growth?," Contributions to Economics, in: Intangible Capital and Growth, chapter 0, pages 141-165, Springer.
    • Handle: RePEc:spr:conchp:978-3-030-86186-5_7
    DOI: 10.1007/978-3-030-86186-5_7
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