Trust, Growth and Well-Being: New Evidence and Policy Implications

Abstract

This survey reviews the recent research on trust, institutions and economic development. It discusses the various measures of trust and documents the substantial heterogeneity of trust across space and time. The conceptual mechanisms that explain the influence of trust on economic performance and the methods employed to identify the causal impact of trust on economic performance are reviewed. We document the mechanisms of interactions between trust and economic development in the realms of finance, innovation, the organization of firms, the labor market and the product market. We also document recent research on the impact of trust on human development and well-being. The last part reviews recent progress to identify how institutions and policies can affect trust and promote pro-social behaviors.

Keywords: growth, human development, institutions, trust, well-being

JEL Classification: O11, O43, Z13