The Chips are Down: The Influence of Family on Children's Trust Formation

37 Pages Posted: 27 Jun 2016

See all articles by Corrado Giulietti

Corrado Giulietti

Department of Economics

Enrico Rettore

University of Trento; IRVAPP; IZA

Sara Tonini

University of Trento

Abstract

Understanding the formation of trust at the individual level is a key issue given the impact that it has been recognized to have on economic development. Theoretical work highlights the role of the transmission of values such as trust from parents to their children. Attempts to empirically measure the strength of this transmission relied so far on the cross-sectional regression of the trust of children on the contemporaneous trust of their parents. We introduce a new identification strategy which hinges on a panel of parents and their children drawn from the German Socio-Economic Panel. Our results show that: 1) a half to two thirds of the observed variability of trust is pure noise irrelevant to the transmission process; 2) this noise strongly biases the parameter estimates of the OLS regression of children's trust on parents' trust; however an instrumental variable procedure straightforwardly emerges from the analysis; 3) the dynamics of the component of trust relevant to the transmission process shed light on the structural interpretation of the parameters of this regression; 4) the strength of the flow of trust that parents pass to their children as well as of the sibling correlations due to other factors are easily summarized by the conventional R2 of a latent equation. In our sample, approximately one fourth of the variability of children's trust is inherited from their parents while two thirds are attributable to the residual sibling correlation.

Keywords: trust, intergenerational transmission, siblings correlations, cultural transmission

JEL Classification: J62, P16, Z1

Suggested Citation

Giulietti, Corrado and Rettore, Enrico and Tonini, Sara, The Chips are Down: The Influence of Family on Children's Trust Formation. IZA Discussion Paper No. 9999. Available at SSRN: https://ssrn.com/abstract=2800496

Corrado Giulietti (Contact Author)

Department of Economics ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Enrico Rettore

University of Trento ( email )

Via Verdi 26
Trento, 28122
Italy
+39 0461 281316 (Phone)

IRVAPP ( email )

Via Santa Croce 77
Trento, I-38122
Italy

IZA ( email )

Sara Tonini

University of Trento

Via Giuseppe Verdi 26
Trento, Trento 38152
Italy

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