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Regulation and Distrust

Author

Listed:
  • Philippe Aghion

    (Harvard University)

  • Yann Algan

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPREMAP - Centre pour la recherche économique et ses applications - ECO ENS-PSL - Département d'économie de l'ENS-PSL - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres)

  • Pierre Cahuc

    (X - École polytechnique, CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz])

  • Andrei Shleifer

    (Harvard University)

Abstract

We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to multiple equilibria. A key implication of the model is that individuals in low-trust countries want more government intervention even though they know the government is corrupt. We test this and other implications of the model using country- and individual-level data on trust and beliefs about the role of government, as well as on changes in beliefs during the transition from socialism.

Suggested Citation

  • Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," SciencePo Working papers Main hal-03384665, HAL.
  • Handle: RePEc:hal:spmain:hal-03384665
    DOI: 10.1162/qjec.2010.125.3.1015
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03384665
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    More about this item

    Keywords

    Economic regulation; Measures of trust; Government regulation;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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