Trust and the Growth of Government

37 Pages Posted: 11 Dec 2013

See all articles by John E. Garen

John E. Garen

University of Kentucky - Gatton College of Business and Economics

J. R. Clark

The University of Tennessee at Chattanooga

Date Written: December 10, 2013

Abstract

A feature of post-World War II economic history is the growth in government, paradoxically accompanied by a decline in trust of government. How does a mistrusted institution continue to grow? We utilize key findings in the economics, behavioral, and psychology literatures to develop a model to understand how this can occur, as well as illuminating the interconnections between government, rent seeking, productivity, and trust. When an increase in government powers leads to more rent-seeking activity, mistrust of government is engendered, which lowers productivity and sows the seeds for more rent seeking and further government growth. Also, a version of our model has a “trust trap,” illustrating how an economy may become stuck in a low trust/high rent seeking/big government equilibrium.

Keywords: growth of government, trust and cooperation, rent seeking

JEL Classification: D72, H11

Suggested Citation

Garen, John E. and Clark, Jeff R., Trust and the Growth of Government (December 10, 2013). Available at SSRN: https://ssrn.com/abstract=2366081 or http://dx.doi.org/10.2139/ssrn.2366081

John E. Garen (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

Department of Economics
Lexington, KY 40506
United States
859-257-3581 (Phone)
859-323-1920 (Fax)

Jeff R. Clark

The University of Tennessee at Chattanooga ( email )

Department of Economics
Suite 313 Fletcher Hall
Chattanooga, TN 37403-2598
United States

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