The Role of Government and Trust in the Market Economy

25 Pages Posted: 28 Jun 2018

See all articles by Nadja König

Nadja König

Government of the Federal Republic of Germany - German Federal Ministry of Finance

Ludger Schuknecht

Bundesministerium der Finanzen

Date Written: May 02, 2018

Abstract

This paper studies the role of governments and its link to trust. We argue that the public’s trust strongly depends on governments delivering on their core tasks in a market economy. In some economies, a neglect of core tasks can be observed and there seems to be some erosion, notably in terms of securing sound rules of the game in industrialised countries. We find very little correlation between government expenditure and trust but a strong correlation with delivering on core tasks. This leads us to conclude that it is not government spending per se that needs to increase to build trust, but rather better focused government activities.

Keywords: role of government, public goods, trust in government, quality of public finances

JEL Classification: H110, H410, H500

Suggested Citation

König, Nadja and Schuknecht, Ludger, The Role of Government and Trust in the Market Economy (May 02, 2018). CESifo Working Paper Series No. 6997. Available at SSRN: https://ssrn.com/abstract=3198149

Nadja König

Government of the Federal Republic of Germany - German Federal Ministry of Finance ( email )

Wilhelmstrasse 97
Berlin, 10117
Germany

Ludger Schuknecht (Contact Author)

Bundesministerium der Finanzen ( email )

Detlev-Rohwedder-Haus
Wilhelmstrße 97
Berlin, D-10117
Germany

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