Which Type of Trust Matters?: Interpersonal vs. Institutional vs. Political Trust

71 Pages Posted: 12 May 2017

Date Written: May 15, 2017

Abstract

Although an increasing number of studies demonstrate the importance of trust in economic growth, they only focus on interpersonal trust. This paper considers various types of trust including interpersonal trust (i.e., trust in people), institutional trust (e.g., trust in the fair administration of justice, or trust in the protection of property rights), and political trust (e.g., trust in government or political parties), and investigates their impacts on growth. Using novel cross-country survey data, this paper finds that institutional trust is most robustly related to the economic growth in a cross-section of 46 countries. This paper also shows that there is a causal relationship between institutional trust and growth using panel data from those 46 countries. Hence, in contrast with the previous trust literature which focuses on trust in “people” as a “time-invariant cultural feature,” this paper stresses trust in “social system” as an “institutions-dependent feature.”

Keywords: Institutions and economic growth, Trust, Social capital

JEL Classification: O17, P16, Z13

Suggested Citation

Hwang, In Do, Which Type of Trust Matters?: Interpersonal vs. Institutional vs. Political Trust (May 15, 2017). Bank of Korea WP 2017-15. Available at SSRN: https://ssrn.com/abstract=2967051 or http://dx.doi.org/10.2139/ssrn.2967051

In Do Hwang (Contact Author)

The Bank of Korea ( email )

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