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Can trust effects on development be generalized? A response by quantile

Listed author(s):
  • Jesús Peiró-Palomino

    ()

    (Economics Department, Universitat Jaume I, Castellón, Spain)

  • Emili Tortosa-Ausina

    ()

    (Department of Economics, Universitat Jaume I, Castellón, Spain)

While the beneficial effects of social trust on economic performance have been largely recognized, we analyze if these effects can be generalized for economies at different stages of economic development and for different time horizons. Contrary to previous studies on this issue based on average effects (mostly considering ordinary least squares estimations), we follow a quantile regression approach, which enables to capture heterogeneous effects of trust, which are dependent on the level of development. By considering data of 80 countries and using trust indicators from five different waves of the World Values Survey (WVS), our results by quantile indicate that high-growth processes are strongly influenced by the previous stock of trust available in the country, and that trust is less relevant for the poorest economies. This would suggest, not only that trust effects cannot be generalized for all countries, as some previous studies suggested, but also that the implications of trust for short and long term development actually differ.

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File URL: http://www.doctreballeco.uji.es/wpficheros/peiro_tortosa2.pdf
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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2012/16.

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Length: 35 pages
Date of creation: 2012
Handle: RePEc:jau:wpaper:2012/16
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  1. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  2. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  3. Horváth, Roman, 2013. "Does trust promote growth?," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 777-788.
  4. Marcel Fafchamps, 2006. "Development and social capital," Journal of Development Studies, Taylor & Francis Journals, vol. 42(7), pages 1180-1198.
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