Historical Trust Levels Predict the Current Size of the Welfare State

19 Pages Posted: 12 Jan 2011

See all articles by Andreas Bergh

Andreas Bergh

Research Institute of Industrial Economics (IFN); Lund University - Department of Economics

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Date Written: January 11, 2011

Abstract

Despite the fact that large welfare states are vulnerable to free-riding, the idea that universal welfare states lead to higher trust levels in the population has received some attention and support among political scientists recently. This paper argues that the opposite direction of causality is more plausible, i.e. that populations with higher trust levels are more prone to creating and successfully maintaining universal welfare states with high levels of taxation where publicly financed social insurance schemes. The hypothesis is tested using instrumental variable techniques to infer variations in trust levels that pre-date current welfare states, and then using the variation in historical trust levels to explain the current size and design of the welfare state, and finally comparing the explanatory power of trust to other potential explanatory factors such as left-right ideology and economic openness. To infer variation about historical trust levels, we use three instruments, all used previously in the trust literature: the grammatical rule allowing pronoun-drop, average temperature in the coldest month and a dummy for constitutional monarchies. Using cross-sectional data for 77 countries, we show that these instruments are valid and that countries with higher historical trust levels have significantly higher public expenditure as a share of GDP and also have more regulatory freedom. This finding is robust to controlling for several other potential explanations of welfare state size.

Suggested Citation

Bergh, Andreas and Bjørnskov, Christian, Historical Trust Levels Predict the Current Size of the Welfare State (January 11, 2011). Kyklos, Vol. 64, Issue 1, pp. 1-19, 2011. Available at SSRN: https://ssrn.com/abstract=1738812 or http://dx.doi.org/10.1111/j.1467-6435.2010.00492.x

Andreas Bergh

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34 2nd floor
Stockholm, SE-102 15
Sweden
0707790734 (Phone)

HOME PAGE: http://www.ifn.se/web/AndreasB

Lund University - Department of Economics ( email )

P.O. Box 7082
S-220 07
Lund
Sweden

HOME PAGE: http://www.nek.lu.se/

Christian Bjørnskov

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Center for Political Studies

Landgreven 3
Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
2
Abstract Views
270
PlumX Metrics