Can Trust Effects on Development Be Generalized? A Response by Quantile

Abstract

While the beneficial effects of social trust on economic performance have been largely recognized, we analyze if these effects can be generalized for economies at different stages of economic development and for different time horizons. Contrary to previous studies on this issue based on average effects (mostly considering ordinary least squares estimations), we follow a quantile regression approach, which enables to capture heterogeneous effects of trust, which are dependent on the level of development. By considering data of 80 countries and using trust indicators from five different waves of the World Values Survey (WVS), our results by quantile indicate that high-growth processes are strongly influenced by the previous stock of trust available in the country, and that trust is less relevant for the poorest economies. This would suggest, not only that trust effects cannot be generalized for all countries, as some previous studies suggested, but also that the implications of trust for short and long term development actually differ.

Keywords: Trust, GDP per capita, economic growth, quantile regression

JEL Classification: A13, Z13