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Trust and Economic Performance: A Panel Study

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  • Xin, Guangyi

Abstract

This paper critically reviews the current various measures of trust through surveys/questionnaires and trust experiments. The main shortcoming from such approaches is that the trust index produced from surveys and experiment are ambiguous. Given these arguments, I use Factor Analysis technique to construct a new trust index that account for indicators of degree of trust. Consequently, the rankings of countries in my index is more consistent compared to the rankings of existing trust indices. Using the above, I illustrate the panel analysis on the influence of trust on FDI inflows and income inequality. Trust turns out to play a significant role on FDI inflows. With regard to income inequality, trust is more pronounced among the OECD countries.

Suggested Citation

  • Xin, Guangyi, 2017. "Trust and Economic Performance: A Panel Study," MPRA Paper 80815, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80815
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    File URL: https://mpra.ub.uni-muenchen.de/80815/1/MPRA_paper_80815.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Trust; Economic Performance; FDI inflow; Income Inequality;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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