Trust and the Growth of Government
37 Pages Posted: 11 Dec 2013
Date Written: December 10, 2013
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: Suggested Citation