Trust and Growth: A Shaky Relationship

20 Pages Posted: 2 Oct 2006 Last revised: 3 Nov 2009

See all articles by Mikael Elinder

Mikael Elinder

Uppsala University - Department of Economics; Research Institute of Industrial Economics (IFN)

Niclas Berggren

Research Institute of Industrial Economics (IFN); University of Economics, Prague - Faculty of Economics and Public Administration

Henrik Jordahl

Research Institute of Industrial Economics (IFN); CESifo (Center for Economic Studies and Ifo Institute); IZA

Date Written: May 24, 2007

Abstract

We conduct an extensive robustness analysis of the relationship between trust and growth by investigating a later time period and a bigger sample than in previous studies. In addition to robustness tests that focus on model uncertainty, we systematize the investigation of outlier influence on the results by using the robust estimation technique Least Trimmed Squares. We find that when outliers (especially China) are removed, the trust-growth relationship is no longer robust. On average, the trust coefficient is half as large as in previous findings.

Keywords: trust, growth, robustness, social capital, outliers

JEL Classification: O40, Z13

Suggested Citation

Elinder, Mikael and Berggren, Niclas and Jordahl, Henrik, Trust and Growth: A Shaky Relationship (May 24, 2007). IFN Working Paper No. 705; Empirical Economics, Vol. 35, No. 2, pp. 251-274, 2008. Available at SSRN: https://ssrn.com/abstract=933982

Mikael Elinder

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, 751 20
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Niclas Berggren

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/nb

University of Economics, Prague - Faculty of Economics and Public Administration ( email )

nám. W. Churchilla 4
Praha, 130 67
Czech Republic

Henrik Jordahl (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/hj

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

Poschinger Str. 5
Munich, DE-81679
Germany

IZA ( email )

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

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