Trust and Delegation: Theory and Evidence

27 Pages Posted: 3 Mar 2014

See all articles by Nurullah Gur

Nurullah Gur

Istanbul Commerce University

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: March 2, 2014

Abstract

Social trust is associated with good economic performance, but little is known about the transmission mechanisms connecting trust and performance. We explore the effect of trust on delegation decisions. In a theoretical framework, we note that delegation is a low-cost option when management decisions can be implemented without monitoring. This option is, however, risky and more likely to be profitable in higher-trust environments. In a set of cross-country regressions, we show a strong association between trust and delegation, which is increasing in economic sophistication.

Keywords: Social trust, economic development, delegation

JEL Classification: L22, O40, Z13

Suggested Citation

Gur, Nurullah and Bjørnskov, Christian, Trust and Delegation: Theory and Evidence (March 2, 2014). Available at SSRN: https://ssrn.com/abstract=2403463 or http://dx.doi.org/10.2139/ssrn.2403463

Nurullah Gur (Contact Author)

Istanbul Commerce University ( email )

Imrahor Cad. No. 90
Sutluce Beyoglu
Istanbul
Turkey

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

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