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Trust and Growth in the 1990s: A Robustness Analysis

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Abstract

We conduct an extensive robustness analysis of the relationship between trust and growth for a later time period (the 1990s) and with a bigger sample (63 countries) than previous studies. In addition to robustness tests that focus on model uncertainty, we use Least Trimmed Squares, a robust estimation technique, to identify outliers and investigate how they affect the results. We find that the trust-growth relationship is less robust with respect to empirical specification and to countries in the sample than previously claimed, and that outliers affect the results. Nevertheless trust seems quite important compared with many other growth-regression variables.

Suggested Citation

  • Bengtsson, Mikael & Berggren, Niclas & Jordahl, Henrik, 2005. "Trust and Growth in the 1990s: A Robustness Analysis," Ratio Working Papers 60, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0060
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    1. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
    2. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, January.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
    5. Raymond Florax & Henri L.F. De Groot & Reinout Heijungs, 2003. "The Empirical Economic Growth Literature: Robustness, Significance and Size," ERSA conference papers ersa03p540, European Regional Science Association.
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    Cited by:

    1. Dinda, Soumyananda, 2012. "Social Capital Formation Ensuring Inclusive Growth: A Development Mechanics for Backward Region," MPRA Paper 66261, University Library of Munich, Germany, revised 12 Dec 2012.
    2. Friedrich Heinemann & Benjamin Tanz, 2008. "The impact of trust on reforms," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 11(3), pages 173-185.
    3. Soumyananda Dinda, 2014. "A theoretical basis for green growth," International Journal of Green Economics, Inderscience Enterprises Ltd, vol. 8(2), pages 177-189.
    4. Dzialek, Jaroslaw, 2009. "Social capital and economic growth in Polish regions," MPRA Paper 18287, University Library of Munich, Germany.
    5. Rami Abdelkafi & Hatem Derbel, 2008. "Une décomposition de l'effet de la liberté économique sur la croissance dans les pays en développement," EconomiX Working Papers 2008-19, University of Paris Nanterre, EconomiX.
    6. Monica Szeles, 2013. "Re-examining the relationship between economic growth and inequality in the New Member States," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(5), pages 2799-2813, August.
    7. Thomas Farole & Andrés Rodríguez-Pose & Michael Storper, 2007. "Social capital, rules, and institutions: A cross-country investigation," Working Papers 2007-12, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    8. Dinda, Soumyananda, 2009. "A Simple Complementary Development Mechanics for African Countries," MPRA Paper 55307, University Library of Munich, Germany, revised Apr 2014.
    9. Dinda, Soumyananda, 2008. "Social capital in the creation of human capital and economic growth: A productive consumption approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 2020-2033, October.
    10. Niclas Berggren & Henrik Jordahl, 2006. "Free to Trust: Economic Freedom and Social Capital," Kyklos, Wiley Blackwell, vol. 59(2), pages 141-169, May.
    11. Dinda, Soumyananda, 2015. "Social Preference and Governance: A Case Study in India," MPRA Paper 75828, University Library of Munich, Germany, revised 14 Apr 2015.
    12. Dinda, Soumyananda, 2013. "Inclusive Green Growth and Sustainable Development through Productive Consumption," MPRA Paper 50574, University Library of Munich, Germany, revised 09 Sep 2013.
    13. Soumyananda Dinda, 2014. "Inclusive growth through creation of human and social capital," International Journal of Social Economics, Emerald Group Publishing, vol. 41(10), pages 878-895, October.

    More about this item

    Keywords

    trust; growth; robustness analysis; extreme bounds analysis; social capital; least trimmed squares; outliers;

    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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