Does Democracy Foster Trust?

31 Pages Posted: 13 Jun 2006

See all articles by Helmut Rainer

Helmut Rainer

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Thomas Siedler

University of Hamburg - Faculty of Business, Economics, and Social Sciences; DIW Berlin; Institute for the Study of Labor (IZA); University of Essex

Date Written: May 2006

Abstract

The level of trust inherent in a society is important for a wide range of microeconomic and macroeconomic outcomes. This paper investigates how individuals' attitudes toward social and institutional trust are shaped by the political regime in which they live. The German reunification is a unique natural experiment that allows us to conduct such a study. Using data from the German General Social Survey (ALLBUS) and from the German Socio-Economic Panel Study (SOEP), we obtain two sets of results. On one side, we find that, shortly after reunification, East Germans displayed a significantly less trusting attitude than West Germans. This suggests a negative effect of communism in East Germany versus democracy in West Germany on social and institutional trust. However, the experience of democracy by East Germans since reunification did not serve to increase levels of social trust significantly. In fact, we cannot reject the hypothesis that East Germans, after more than a decade of democracy, have the same levels of social distrust as shortly after the collapse of communism. In trying to understand the underlying causes, we show that the persistence of social distrust in the East can be explained by negative economic outcomes that many East Germans experienced in the post-reunification period. Our main conclusion is that democracy can foster trust in post-communist societies only when citizens' economic outcomes are right.

Keywords: social trust, institutional trust, political regimes

JEL Classification: P51, Z13

Suggested Citation

Rainer, Helmut and Siedler, Thomas, Does Democracy Foster Trust? (May 2006). IZA Discussion Paper No. 2154. Available at SSRN: https://ssrn.com/abstract=908240

Helmut Rainer

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Thomas Siedler (Contact Author)

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146
Germany

DIW Berlin ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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