Economists have been exploring the relationship between prosperity and trust since the 1950s. This column explores the possible relationships, arguing that enhanced economic prosperity acts as a signal that fellow citizens are trustworthy. The more optimistic assessment then breeds trust among individual citizens. This theory suggests the possibility of a mutual feedback between trust and economic growth.
Markus Brückner, Alberto Chong, Mark Gradstein, 29 August 2015
Francesco D'Acunto, Marcel Prokopczuk, Michael Weber, 26 February 2015
Discrimination can be costly for both victims and perpetrators. This column uses the variation of historical Jewish persecution across German counties to proxy for localised distrust in financial markets. Persecution reduces the average stock market participation rate of households by 7.5%–12%. This striking effect is stable over time, across cohorts, and across education levels. The effect survives when comparing only geographically close counties. It suggests that the persecution of minorities may negatively affect societal wealth even far into the future through the channel of intergenerationally transmitted investment norms.
Daniel Houser, John List, Marco Piovesan, Anya Samek, Joachim Winter, 23 February 2015
Dishonesty is a pervasive and costly phenomenon. This column reports the results of a lab experiment in which parents had an opportunity to behave dishonestly. Parents cheated the most when the prize was for their child and their child was not present. Parents cheated little when their child was present, but were more likely to cheat in front of sons than in front of daughters. The latter finding may help to explain why women attach greater importance to moral norms and are more honest.
Maxim Ananyev, Sergei Guriev, 08 February 2015
The negative effects of recessions are not limited to consumption. Among others, they could also be harmful to preferences and values. This column uses recent evidence from Russia to argue that recessions can result in a sizeable decrease in interpersonal trust. This effect is transient in places where the fall in trust is small. In these regions, trust snaps back to pre-crisis levels as GDP recovers. In the places where fall in trust is large, the effect is persistent. Even after a recovery, trust remains 10 percentage points below the pre-crisis level.
John Helliwell, Haifang Huang, Shawn Grover, Shun Wang, 30 November 2014
Evaluations of wellbeing complement and encompass established measures of economic progress. This column presents findings on the way governance affects wellbeing. The results indicate that people are more satisfied with their lives in countries with better governance quality. Confidence and trust in public institutions play an important role in this finding. Additional benefits to wellbeing arise when nations are able to better weather economic and other crises.
Niklas Bengtsson, Per Engström, 28 October 2014
Critics of the ‘audit society’ and the so-called ‘new public management’ doctrines have gained momentum in recent years. At the centre of the critique is the so-called motivation crowding-out hypothesis. This column presents evidence from a field experiment involving Swedish non-profits. Far from crowding out intrinsic motivation, the threat of an audit improved all aspects of efficiency.
Yann Algan, Pierre Cahuc, Marc Sangnier, 17 July 2014
It is commonly argued that the persistence of large welfare states in Scandinavian countries is due to the trustworthiness of their citizens. This column shows that the relationship between trust and the size of the welfare state is twin peaked. Untrustworthy individuals support generous welfare states because they expect to benefit without bearing the costs, whereas civic-minded individuals only support generous welfare states when surrounded by people they trust.
Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden, 08 July 2014
Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.
Owen McDougall, Ashoka Mody, 17 May 2014
Turnout in the 2014 European Parliament elections is seen as a critical test for EU democracy. This column presents some predictions. Trust in the ECB – rather than in the European Parliament itself – has been associated with higher turnout in previous elections. Macroeconomic conditions are also important – where a country’s fiscal problems are greater, voters are more inclined to vote.
John Helliwell, Shun Wang, Jinwen Xu, 12 March 2014
Social norms have been shown to have important effects on economic outcomes. This column discusses new evidence showing that social norms are deeply rooted in long-standing cultures, but do evolve in reaction to major changes. It draws on a fully global sample involving migrants in more than 130 countries, using seven waves of the Gallup World Poll.
Sascha Bützer, Christina Jordan, Livio Stracca, 23 November 2013
Since the advent of the Eurozone sovereign-debt crisis, economic commentators have drawn attention to macroeconomic imbalances within the Eurozone. This column presents evidence on the link between macroeconomic imbalances and differences in culture – or more specifically, interpersonal trust. A conservative estimatation suggests that a one standard-deviation increase in trust reduces macroeconomic imbalances by about a quarter of a standard deviation. Moreover, differences in interpersonal trust can explain a fifth of the variation in intra-Eurozone imbalances.
Olivier Blanchard, Florence Jaumotte, Prakash Loungani, 18 October 2013
The state of labour markets in advanced economies remains dismal despite recent signs of growth. This column explains the IMF’s logic behind the advice it provided on labour markets during the Great Recession. It argues that flexibility is crucial both at the micro level, i.e. on worker reallocation, and at the macro level, e.g. on collective agreements. It suggests that the IMF approach is close to the consensus among labour-market researchers.
Jeffrey V. Butler, Paola Giuliano, Luigi Guiso, 18 December 2012
Trust among strangers is at the heart of well-functioning market economics. This column argues that individual trust beliefs are related to individual trustworthiness, which in turn is related to the values parents transmit to their children. It adds that if someone forms trust beliefs about unknown people by attributing to others his own trustworthiness, he is bound to make mistakes by being either too naïve or too wary.
Felix Roth, Lars Jonung, Felicitas Nowak-Lehmann, 05 November 2012
The Eurozone crisis has meant slow growth, rising unemployment, and social unrest. This column gauges the impact of all this on European citizens‘ opinions about the euro and EU institutions. Using Eurobarometer surveys, the authors find that, within the Eurozone, the crisis has only marginally lowered support for the euro but has led to a sharp fall in public trust in the ECB.
Yann Algan, Pierre Cahuc, Andrei Shleifer, 24 October 2011
Can trust be taught in the classroom? The authors of CEPR DP8625 present evidence that progressive or 'horizontal' teaching methods can help children develop beliefs that reinforce social capital, with broad benefits for society and the economy overall.
Sascha O. Becker, Ludger Woessmann, 31 May 2011
For centuries, Europe was ruled by empires wielding global influence. This column shows that these empires can leave behind a long-lasting legacy through cultural norms. Comparing individuals on opposite sides of the long-gone Habsburg Empire border within five countries, it shows that firms and people living in what used to be the empire have higher trust in courts and police.
Gilles Saint-Paul, Giancarlo Corsetti, John Hassler, Luigi Guiso, Hans-Werner Sinn, Jan-Egbert Sturm, Xavier Vives, Michael P. Devereux, 21 March 2010
Public distrust of bankers and financial markets has risen dramatically with the financial crisis. This column argues that this loss of trust in the financial system played a critical role in the collapse of economic activity that followed. To undo the damage, financial regulation needs to focus on restoring that trust.
Paola Giuliano, Luigi Guiso, Jeffrey V. Butler, 08 October 2009
Virtually every commercial transaction involves trust, and more trusting societies tend to be richer. But does it pay individuals to trust? This column suggests that relationship between trust and income is not always increasing but is instead hump-shaped. Individuals that mistrust too much tend to miss profitable opportunities, while those who are too trusting are cheated abnormally often.
Daniel Gros, Felix Roth, 10 September 2009
Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory. Central bankers all over the world should redouble their efforts to regain the trust of the people towards their institution.
Patrick Francois, Thomas Fujiwara, Tanguy van Ypersele, 27 August 2009
Recent research argues that culture affects economic outcomes. Do markets instil cultural values that support good outcomes? This column provides evidence that more competitive markets raise employees’ trust levels. That suggests that competitive markets build the values that support them.