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Trust and Growth: A Shaky Relationship

  • Berggren, Niclas

    ()

    (The Ratio Institute)

  • Elinder, Mikael

    ()

    (Uppsala University)

  • Jordahl, Henrik

    ()

    (Research Institute of Industrial Economics (IFN))

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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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 705.

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Length: 19 pages
Date of creation: 24 May 2007
Date of revision:
Publication status: Published in Empirical Economics, 2008, pages 251-274.
Handle: RePEc:hhs:iuiwop:0705
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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