Historical Trust Levels Predict Current Welfare State Design

Abstract

With cross-sectional data for 76 countries, we use IV techniques to show that historical trust levels predict several indicators of current welfare state design, including universalism and high levels of regulatory freedom. We argue that high levels of trust and trustworthiness are necessary, but not sufficient, conditions for societies to successfully develop universal welfare states that would otherwise be highly vulnerable to free riding and fraudulent behaviour. Our results do not exclude a positive feedback from welfare state universalism to individual trust, although we claim that the important causal link goes from historically trust levels to current welfare state design.