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Trust in Public Institutions over the Business Cycle

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  • Stevenson, Betsey

    ()

  • Wolfers, Justin

    () (University of Michigan)

Abstract

We document that trust in public institutions – and particularly trust in banks, business and government – has declined over recent years. U.S. time series evidence suggests that this partly reflects the pro-cyclical nature of trust in institutions. Cross-country comparisons reveal a clear legacy of the Great Recession, and those countries whose unemployment grew the most suffered the biggest loss in confidence in institutions, particularly in trust in government and the financial sector. Finally, analysis of several repeated cross-sections of confidence within U.S. states yields similar qualitative patterns, but much smaller magnitudes in response to state-specific shocks.

Suggested Citation

  • Stevenson, Betsey & Wolfers, Justin, 2011. "Trust in Public Institutions over the Business Cycle," IZA Discussion Papers 5570, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5570
    as

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    References listed on IDEAS

    as
    1. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," International Finance, Wiley Blackwell, vol. 6(1), pages 1-26, Spring.
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    Keywords

    trust; banks; congress; survey data; confidence; institutions; media; big business; courts;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • K0 - Law and Economics - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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