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The Impact of Trust on Reforms

  • Heinemann, Friedrich
  • Tanz, Benjamin

In a constantly changing economic environment a country's ability to undertake institutional reforms is crucial to maintain economic growth and to promote the welfare of its citizens. A wide range of determinants for institutional reforms have been identified. However, the impact of trust on reforms has so far never been addressed. We provide theoretical arguments why trust should influence institutional changes and test the relationship empirically. We find a significant positive relation between trust and reforms with regard to government size, the legal system, and deregulation of private businesses and the labor market. The results in other policy fields are ambiguous.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-053.

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Date of creation: 2008
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Handle: RePEc:zbw:zewdip:7376
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  1. Heinemann, Friedrich, 2004. "Explaining Reform Deadlocks," ZEW Discussion Papers 04-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Ashoka Mody & Abdul Abiad, 2005. "Financial Reform; What Shakes It? What Shapes It?," IMF Economic Issues 35, International Monetary Fund.
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  8. Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
  9. Axel Dreher, 2005. "Does Globalization Affect Growth? Evidence from a new Index of Globalization," TWI Research Paper Series 6, Thurgauer Wirtschaftsinstitut, Universit�t Konstanz.
  10. Bryan Caplan, 2002. "Systematically Biased Beliefs About Economics: Robust Evidence of Judgemental Anomalies from the Survey of Americans and Economists on the Economy," Economic Journal, Royal Economic Society, vol. 112(479), pages 433-458, April.
  11. Heckelman, Jac & Knack, Stephen, 2005. "Foreign aid and market-liberalizing reform," Policy Research Working Paper Series 3557, The World Bank.
  12. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  13. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  14. Belke, Ansgar H. & Herz, Bernhard & Vogel, Lukas, 2005. "Structural Reforms and the Exchange Rate Regime: A Panel Analysis for the World versus OECD Countries," IZA Discussion Papers 1798, Institute for the Study of Labor (IZA).
  15. Cox, James C., 2004. "How to identify trust and reciprocity," Games and Economic Behavior, Elsevier, vol. 46(2), pages 260-281, February.
  16. Pitlik, Hans & Wirth, Steffen, 2003. "Do crises promote the extent of economic liberalization?: an empirical test," European Journal of Political Economy, Elsevier, vol. 19(3), pages 565-581, September.
  17. Boix, Carles & Posner, Daniel N., 1998. "Social Capital: Explaining Its Origins and Effects on Government Performance," British Journal of Political Science, Cambridge University Press, vol. 28(04), pages 686-693, October.
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