IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Does Trust Promote Growth?

  • Roman Horváth

    ()

    (Charles University, Prague and IOS, Regensburg)

We examine the effect of generalized trust on long-term economic growth. Unlike in previous studies, we use Bayesian model averaging to deal rigorously with model uncertainty and attendant omitted variable bias. In addition, we address endogeneity and assess whether the effect of trust on growth is causal. Examining more than forty regressors for nearly fifty countries, we show that trust exerts a positive effect on long-term growth and, based on the posterior inclusion probabilities, suggest that trust is an important driver of long-term growth. Our results also show that trust is key for growth in countries with a weak rule of law.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.dokumente.ios-regensburg.de/publikationen/wp/wp_ios_319.pdf
Download Restriction: no

Paper provided by Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) in its series Working Papers with number 319.

as
in new window

Length: 26
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:ost:wpaper:319
Contact details of provider: Postal:
Landshuter Str. 4, 93047 Regensburg

Phone: +49-(0)941-943 54 10
Fax: +49-(0)941-943 54 27
Web page: http://www.ios-regensburg.de
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Liang, Feng & Paulo, Rui & Molina, German & Clyde, Merlise A. & Berger, Jim O., 2008. "Mixtures of g Priors for Bayesian Variable Selection," Journal of the American Statistical Association, American Statistical Association, vol. 103, pages 410-423, March.
  2. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  3. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Trust in Large Organizations," NBER Working Papers 5864, National Bureau of Economic Research, Inc.
  4. Felix Roth, 2009. "Does Too Much Trust Hamper Economic Growth?," Kyklos, Wiley Blackwell, vol. 62(1), pages 103-128, 02.
  5. Enrico Spolaore & Romain Wacziarg, 2006. "The Diffusion of Development," NBER Working Papers 12153, National Bureau of Economic Research, Inc.
  6. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2006. "Does Culture Affect Economic Outcomes?," CEPR Discussion Papers 5505, C.E.P.R. Discussion Papers.
  7. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
  8. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
    • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  9. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 677-716, 06.
  10. Enrique Moral-Benito, 2010. "Determinants of economic growth: A Bayesian panel data approach," Working Papers 1031, Banco de España;Working Papers Homepage.
  11. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1095-1131.
  12. Klaus Desmet & Michel Breton & Ignacio Ortuño-Ortín & Shlomo Weber, 2011. "The stability and breakup of nations: a quantitative analysis," Journal of Economic Growth, Springer, vol. 16(3), pages 183-213, September.
  13. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," Sciences Po publications info:hdl:2441/4km7l02j139, Sciences Po.
  14. Theo Eicher & Chris Papageorgiou & Oliver Röhn, 2007. "Unraveling the Fortunates of the Fortunate: An Iterative Bayesian Model Averaging (IBMA) Approach," CESifo Working Paper Series 1907, CESifo Group Munich.
  15. Koop, Gary M & Poirier, Dale J & Tobias, Justin, 2007. "Bayesian Econometric Methods," Staff General Research Papers Archive 12722, Iowa State University, Department of Economics.
  16. Yuriy Gorodnichenko & Gerard Roland, 2011. "Which Dimensions of Culture Matter for Long-Run Growth?," American Economic Review, American Economic Association, vol. 101(3), pages 492-98, May.
  17. Berggren, Niclas & Elinder, Mikael & Jordahl, Henrik, 2007. "Trust and Growth: A Shaky Relationship," Working Paper Series 705, Research Institute of Industrial Economics.
  18. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
  19. Yuriy Gorodnichenko & Gerard Roland, 2010. "Culture, Institutions and the Wealth of Nations," NBER Working Papers 16368, National Bureau of Economic Research, Inc.
  20. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  21. Theo S. Eicher & Chris Papageorgiou & Adrian E. Raftery, 2011. "Default priors and predictive performance in Bayesian model averaging, with application to growth determinants," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(1), pages 30-55, January/F.
  22. Carlin, Bruce Ian & Dorobantu, Florin & Viswanathan, S., 2009. "Public trust, the law, and financial investment," Journal of Financial Economics, Elsevier, vol. 92(3), pages 321-341, June.
  23. Pauline Grosjean, 2011. "The Weight of History on European Cultural Integration: A Gravity Approach," American Economic Review, American Economic Association, vol. 101(3), pages 504-08, May.
  24. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
  25. Nathan Nunn, 2012. "Culture and the Historical Process," NBER Working Papers 17869, National Bureau of Economic Research, Inc.
  26. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Trusting the Stock Market," CEPR Discussion Papers 5288, C.E.P.R. Discussion Papers.
  27. Dearmon, Jacob & Grier, Kevin, 2009. "Trust and development," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 210-220, August.
  28. Carmen Fernandez & Eduardo Ley & Mark F J Steel, 1998. "Benchmark priors for Bayesian model averaging," ESE Discussion Papers 26, Edinburgh School of Economics, University of Edinburgh.
  29. Carmen Fernandez & Eduardo Ley & Mark Steel, 2001. "Model uncertainty in cross-country growth regressions," Econometrics 0110002, EconWPA.
  30. Nathan Nunn & Leonard Wantchekon, 2009. "The Slave Trade and the Origins of Mistrust in Africa," NBER Working Papers 14783, National Bureau of Economic Research, Inc.
  31. Beugelsdijk,Sjoerd & Maseland,Robbert, 2010. "Culture in Economics," Cambridge Books, Cambridge University Press, number 9780521193009, December.
  32. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," Sciences Po publications info:hdl:2441/432sbils8u9, Sciences Po.
  33. Steven N. Durlauf & Andros KOURTELLOS & Chih Ming Tan, 2007. "Are Any Growth Theories Robust?," Discussion Papers Series, Department of Economics, Tufts University 0703, Department of Economics, Tufts University.
  34. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  35. Koop, Gary & Leon-Gonzalez, Roberto & Strachan, Rodney, 2012. "Bayesian model averaging in the instrumental variable regression model," Journal of Econometrics, Elsevier, vol. 171(2), pages 237-250.
  36. Winford H. Masanjala & Chris Papageorgiou, 2008. "Rough and lonely road to prosperity: a reexamination of the sources of growth in Africa using Bayesian model averaging," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 671-682.
  37. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  38. Ahlerup, Pelle & Olsson, Ola & Yanagizawa, David, 2007. "Social Capital vs Institutions in the Growth Process," Working Papers in Economics 248, University of Gothenburg, Department of Economics.
  39. Dearmon, Jacob & Grier, Robin, 2011. "Trust and the accumulation of physical and human capital," European Journal of Political Economy, Elsevier, vol. 27(3), pages 507-519, September.
  40. Oguzhan Dincer & Eric Uslaner, 2010. "Trust and growth," Public Choice, Springer, vol. 142(1), pages 59-67, January.
  41. Ley, Eduardo & Steel, Mark F.J., 2008. "On the Effect of Prior Assumptions in Bayesian Model Averaging with Applications to Growth Regression," MPRA Paper 6773, University Library of Munich, Germany, revised 06 Jan 2008.
  42. Özcan, Burcu & Bjørnskov, Christian, 2011. "Social trust and human development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 753-762.
  43. Shu Yu & Jakob de Haan & Sjoerd Beugelsdijk, 2011. "Trade, Trust and Institutions," CESifo Working Paper Series 3571, CESifo Group Munich.
  44. Sjoerd Beugelsdijk, 2006. "A note on the theory and measurement of trust in explaining differences in economic growth," Cambridge Journal of Economics, Oxford University Press, vol. 30(3), pages 371-387, May.
  45. Eric M. Uslaner, 2008. "The foundations of trust: macro and micro," Cambridge Journal of Economics, Oxford University Press, vol. 32(2), pages 289-294, March.
  46. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  47. Jellema, Jon & Roland, Gerard, 2011. "Institutional clusters and economic performance," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 108-132, June.
  48. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2004. "Trust and economic growth: a robustness analysis," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 118-134, January.
  49. Martin Feldkircher & Stefan Zeugner, 2009. "Benchmark Priors Revisited; On Adaptive Shrinkage and the Supermodel Effect in Bayesian Model Averaging," IMF Working Papers 09/202, International Monetary Fund.
  50. Bjørnskov, Christian, 2006. "How Does Social Trust Affect Economic Growth?," Working Papers 06-2, University of Aarhus, Aarhus School of Business, Department of Economics.
  51. Paul F. Whiteley, 2000. "Economic Growth and Social Capital," Political Studies, Political Studies Association, vol. 48(3), pages 443-466, 06.
  52. Greif, Avner, 1989. "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 857-882, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ost:wpaper:319. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekaterina Selezneva)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.