Competition Builds Trust
This paper shows that (firm-level) competition has a positive impact on (individual-level) trust. Using US statesâ€™ 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 modelâ€™s predictions are strongly borne out.
|Date of creation:||02 Dec 2009|
|Date of revision:||02 Dec 2009|
|Contact details of provider:|| Web page: http://www.economics.ubc.ca/|