The Growth of Government, Trust in Government, and Evidence on Their Coevolution

Abstract

The coevolution of trust in government alongside the growth of government is an aspect of research on the latter topic that has not been explored. We consider this coevolution in the context of a political economy model and a public interest view of government growth and incorporate the role of trust in government. The negative association of the growth in government with trust in government is consistent with a political economy model of government growth, rent seeking/lobbying, trust, and productivity. Though such a model is broadly consistent with the historical data since the late 1950s, we present a more econometrically sophisticated examination of the data. In particular, we recognize the difficulties of statistical inference with non-stationary data and take the appropriate steps to deal with it. There is strong evidence that two aspects of government size – transfer payments and regulatory activity – align with the political economy model. Specifically, we find cointegration indicating the following: a negative association between trust and lobbying activity, a negative relationship between trust and each of these two measures of government, and a positive association of trust and productivity. Though other measures of government size do not produce as robust of findings, we do not find evidence of positive associations of trust and government size nor of trust and lobbying, as might be expected from a public interest view of government.

Keywords: trust, growth of government

JEL Classification: D72, H11