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Competition Builds Trust


  • Francois, Patrick
  • Fujiwara, Thomas
  • van Ypersele, Tanguy


This paper shows that (firm-level) competition has a positive impact on (individual-level) trust. Using US states’ banking de-regulation from the mid 1970s, we first show that an increase in competition had a causal impact on trust, measured in the General Social Survey (GSS). We develop a model which explains why increased competition within a state increases trust. The model also predicts a positive correlation between trust and sectoral competitiveness in the cross-section. We explore this implication using the 2004 wave of the GSS which we match with US census of firms competition measures. The model’s predictions are strongly borne out.

Suggested Citation

  • Francois, Patrick & Fujiwara, Thomas & van Ypersele, Tanguy, 2009. "Competition Builds Trust," Economics working papers patrick_francois-2009-65, Vancouver School of Economics, revised 02 Dec 2009.
  • Handle: RePEc:ubc:bricol:patrick_francois-2009-65

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    Cited by:

    1. Luigi Guiso, 2012. "Trust & Insurance Markets," EIEF Working Papers Series 1207, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2012.
    2. Michael T. Rauh & Giulio Seccia, 2014. "Honesty and Trade," Working Papers 2014-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    3. Hiller, Victor & Verdier, Thierry, 2014. "Corporate culture and identity investment in an industry equilibrium," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 93-112.
    4. Ho-Kong Chan & Kit-Chun Lam & Pak-Wai Liu, 2011. "The Structure of Trust in China and the U.S," Journal of Business Ethics, Springer, vol. 100(4), pages 553-566, June.

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