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Formal Institutions and the Trust Formation Process: A Psychological Approach to Explain the Relationship between Institutions and Interpersonal Trust

  • Tamilina, Larysa
  • Tamilina, Natalya
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    While formal institutions are recognized as having an effect on trust formation, no theoretical or empirical models exist to formalize this relationship. This study introduces a new conceptual framework to explain trust building by individuals and the role that formal rules and laws may play in this process. Drawing on a social-cognitive theory of psychology, we present trust as composed of internal, interpersonal, and external components with the latter encompassing formal institutions. We further demonstrate that there are three mechanisms – sanction, legitimacy, and autonomy – through which formal institutions may affect trust levels either directly or indirectly. These propositions are tested empirically based on the European Social Survey data (2004) by using a variety of statistical techniques. Our empirical analysis demonstrates evidence of heterogeneity in institutional effects on trust, suggesting that the autonomy dimension of the institutional framework is particularly important for trust formation processes.

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    File URL: http://mpra.ub.uni-muenchen.de/49812/1/MPRA_paper_49812.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49812.

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    Date of creation: 01 Jun 2013
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    Handle: RePEc:pra:mprapa:49812
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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. Francis Fukuyama, 2000. "Social Capital and Civil Society," IMF Working Papers 00/74, International Monetary Fund.
    3. Fidrmuc, Jan, 2001. "Economic Reform, Democracy and Growth during Post-Communist Transition," CEPR Discussion Papers 2759, C.E.P.R. Discussion Papers.
    4. Lim, Jamus Jerome & Decker, Jessica Henson, 2007. "Do Democracies Grow Faster? Revisiting the Institutions and Economic Performance Debate," MPRA Paper 6076, University Library of Munich, Germany.
    5. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
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