Institutional Quality Causes Social Trust: Experimental Evidence on Trusting Under the Shadow of Doubt

Social trust underlies virtually any social and economic interaction and is a crucial ingredient for successful collective action. What causes social trust to develop, however, remains poorly understood. Institutional quality has been proposed as a candidate driver and has been shown to correlate with social trust. We provide experimental evidence for the causal direction of this relationship. We ï¬ rst exogenously expose the participants to institutions of different quality, deï¬ ned as their ability to prevent corrupt behaviours on behalf of administrators. We then measure social trust among the participants using a trust game. We ï¬ nd that individuals exposed to settings with low institutional quality trust others signiï¬ cantly less. Moreover, using novel survey data we show that our experimental results correspond to correlational patterns usually found across countries. The paper makes a step forward in the decades-long search for the causality between institutional quality and social trust.