Does Too Much Trust Hamper Economic Growth?

26 Pages Posted: 19 Jan 2009

See all articles by Felix Roth

Felix Roth

University of Goettingen (Gottingen)

Abstract

This paper examines the relationship between trust and economic growth. Taking panel data and using a fixed-effects estimation for a 41-country sample over the time period from 1980 to 2004 and with a total of 129 observations, the paper points out that economic growth is negatively related to an increase in trust. This negative finding is in contrast to most empirical findings using a cross-sectional design. The common knowledge which has governed the nature of discussions in social science and economics for the last ten years, that trust is generally positively related to economic performance, must be seriously questioned. From a policy point of view an increase in trust is crucial for countries with low levels of trust, but can likely be neglected by countries with sufficient levels of trust and may even hamper economic performance in countries with high levels of trust. The relationship is tested in the context of EU countries, OECD countries and developing countries. Interpersonal trust and systemic trust is differentiated.

Suggested Citation

Roth, Felix, Does Too Much Trust Hamper Economic Growth?. Kyklos, Vol. 62, No. 1, pp. 103-128, February 2009. Available at SSRN: https://ssrn.com/abstract=1329776 or http://dx.doi.org/10.1111/j.1467-6435.2009.00424.x

Felix Roth (Contact Author)

University of Goettingen (Gottingen) ( email )

Wilhelmsplatz 1
Göttingen, 37073
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
1,176
PlumX Metrics