Institutional Quality Causes Social Trust: Experimental Evidence on Trusting Under the Shadow of Doubt

Social trust is a crucial ingredient for successful collective action. What causes social trust to develop, however, remains poorly understood. The quality of political institutions has been proposed as a candidate driver and has been shown to correlate with social trust. We show that this relationship is causal. We begin by documenting a positive correlation between quality of institutions, measured by embezzlement, and social trust using survey data. We then take the investigation to the laboratory: We ﬁrst exogenously expose subjects to diﬀerent levels of institutional quality in an environment mimicking public administration embezzlement. We then measure social trust among the participants using a trust game. Coherent with our survey evidence, individuals exposed to low institutional quality trust signiﬁcantly less.

Keywords: Social trust, quality of government, corruption

JEL Classification: D63, D73

Suggested Citation: Suggested Citation

Martinangeli, Andrea and Povitkina, Marina and Jagers, Sverker C. and Rothstein, Bo, Institutional Quality Causes Social Trust: Experimental Evidence on Trusting Under the Shadow of Doubt (November 16, 2020). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2020-04, Available at SSRN: https://ssrn.com/abstract=3731331