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Effect of Income on Trust: Evidence from the 2009 Crisis in Russia

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  • Sergei Guriev

    (Département d'économie)

  • Maxim Ananiev

    (UCLA)

Abstract

This paper draws on a natural experiment to identify the relationship between income and trust. We use a unique panel dataset on Russia where GDP experienced an 8 percent drop in 2009. The effect of the crisis had been very uneven among Russian regions because of their differences in industrial structure inherited from the Soviet times. We find that the regions that specialize in producing capital goods, as well as those depending on oil and gas, had a more substantial income decline during the crisis. The variation in the industrial structure allows creating an instrument for the change in income. After instrumenting average regional income, we find that the effect of income on generalized social trust (the share of respondents saying that most people can be trusted) is statistically and economically significant. Controlling for conventional determinants of trust, we show that 10 percent decrease in income is associated with 5 percentage point decrease in trust. Given that the average level of trust in Russia is 25%, this magnitude is substantial. We also find that post-crisis economic recovery did not restore pre-crisis trust level. Trust recovered only in those regions where the 2009 decline in trust was small. In the regions with the large decline in trust during the crisis, trust in 2014 was still 10 percentage points below its pre-crisis level.

Suggested Citation

  • Sergei Guriev & Maxim Ananiev, 2015. "Effect of Income on Trust: Evidence from the 2009 Crisis in Russia," Sciences Po publications 2015-02, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/18morovaof8fdbvqtbkas8cvhm
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    References listed on IDEAS

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    Cited by:

    1. Guiso, Luigi & Herrera, Helios & Morelli, Massimo & Sonno, Tommaso, 2017. "Demand and Supply of Populism," CEPR Discussion Papers 11871, C.E.P.R. Discussion Papers.
    2. Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2014. "Finance and the Preservation of Wealth," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1221-1254.
    3. Carin Cruijsen & Jakob Haan & David-Jan Jansen, 2016. "Trust and Financial Crisis Experiences," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(2), pages 577-600, June.
    4. De Haas, Ralph & Djourelova, Milena & Nikolova, Elena, 2016. "The Great Recession and social preferences: Evidence from Ukraine," Journal of Comparative Economics, Elsevier, vol. 44(1), pages 92-107.
    5. repec:kap:empiri:v:44:y:2017:i:3:d:10.1007_s10663-017-9377-3 is not listed on IDEAS
    6. Kazakova-Mateva, Yanka & Radeva-Decheva, Donka, 2015. "The role of agroecosystems diversity towards sustainability of agricultural systems," 147th Seminar, October 7-8, 2015, Sofia, Bulgaria 212250, European Association of Agricultural Economists.
    7. Markus Brueckner & Alberto Chong & Mark Gradstein, 2015. "Does Economic Prosperity Breed Trust?," Working Papers 1502, Ben-Gurion University of the Negev, Department of Economics.
    8. Louise Grogan, 2016. "Peoples of the Enemy? Ukrainians and Russians 1995–2011," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 58(4), pages 606-637, December.

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    JEL classification:

    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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