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Trust and the Welfare State: The Twin Peaks Curve

  • Algan, Yann

    ()

    (Sciences Po, Paris)

  • Cahuc, Pierre

    ()

    (Ecole Polytechnique, Paris)

  • Sangnier, Marc

    ()

    (University of Aix-Marseille II)

We show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces. Uncivic people support large welfare states because they expect to benefit from them without bearing their costs. But civic individuals support generous benefits and high taxes only when they are surrounded by trustworthy individuals. We provide empirical evidence for these behaviors and this twin peaks relation in the OECD countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8277.

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Length: 27 pages
Date of creation: Jun 2014
Date of revision:
Publication status: forthcoming in : Economic Journal, 2014
Handle: RePEc:iza:izadps:dp8277
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  1. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
  2. Algan, Yann & Cahuc, Pierre & Shleifer, Andrei, 2011. "Teaching Practices and Social Capital," IZA Discussion Papers 6052, Institute for the Study of Labor (IZA).
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  8. Diebold, Francis X. & Chen, Celia, 1996. "Testing structural stability with endogenous breakpoint A size comparison of analytic and bootstrap procedures," Journal of Econometrics, Elsevier, vol. 70(1), pages 221-241, January.
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  16. Corneo, Giacomo & Grüner, Hans Peter, 2001. "Individual Preferences for Political Redistribution," CEPR Discussion Papers 2694, C.E.P.R. Discussion Papers.
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  18. Fong, Christina M. & Bowles, Samuel & Gintis, Herbert, 2006. "Strong reciprocity and the welfare state," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  19. R. I. Luttens & M.A. Valfort, 2008. "Voting for redistribution under desert-sensitive altruism," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/531, Ghent University, Faculty of Economics and Business Administration.
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