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The Chips Are Down: The Influence of Family on Children‘s Trust Formation

Author

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  • Giulietti, Corrado

    (University of Southampton)

  • Rettore, Enrico

    (University of Padova)

  • Tonini, Sara

    (Universidad de Alicante)

Abstract

Understanding the formation of trust at the individual level is a key issue given the impact that it has been recognized to have on economic development. Theoretical work highlights the role of the transmission of values such as trust from parents to their children. Attempts to empirically measure the strength of this transmission relied so far on the cross-sectional regression of the trust of children on the contemporaneous trust of their parents. We introduce a new identification strategy which hinges on a panel of parents and their children drawn from the German Socio-Economic Panel. Our results show that: 1) a half to two thirds of the observed variability of trust is pure noise irrelevant to the transmission process; 2) this noise strongly biases the parameter estimates of the OLS regression of children's trust on parents' trust; however an instrumental variable procedure straightforwardly emerges from the analysis; 3) the dynamics of the component of trust relevant to the transmission process shed light on the structural interpretation of the parameters of this regression; 4) the strength of the flow of trust that parents pass to their children as well as of the sibling correlations due to other factors are easily summarized by the conventional R2 of a latent equation. In our sample, approximately one fourth of the variability of children's trust is inherited from their parents while two thirds are attributable to the residual sibling correlation.

Suggested Citation

  • Giulietti, Corrado & Rettore, Enrico & Tonini, Sara, 2016. "The Chips Are Down: The Influence of Family on Children‘s Trust Formation," IZA Discussion Papers 9999, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9999
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    References listed on IDEAS

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    2. Brenøe, Anne Ardila & Epper, Thomas, 2019. "Parenting Values Moderate the Intergenerational Transmission of Time Preferences," Economics Working Paper Series 1917, University of St. Gallen, School of Economics and Political Science.
    3. Brenøe, Anne Ardila & Epper, Thomas, 2022. "Parenting values and the intergenerational transmission of time preferences," European Economic Review, Elsevier, vol. 148(C).

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    More about this item

    Keywords

    siblings correlations; cultural transmission; intergenerational transmission; trust;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • Z1 - Other Special Topics - - Cultural Economics

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