2017

The Market-Promoting and Market-Preserving Role of Social Trust in Reforms of Policies and Institutions

Reprint No. 2017:37

Author(s): Niclas Berggren and Christian BjørnskovYear: 2017 Title: Southern Economic Journal Volume (No.): 84 (1) Pages: 3–25
Online article (restrictions may apply)
Preliminary version


Social trust has been identified as a catalyst for reforms. We take the literature further in two ways. First, we analyze mechanisms through which social trust enables liberalizing reforms—by overcoming obstacles in the political process (stemming from ideology, ideological fractionalization, coalition government, minority government, and legislature-seat instability). Second, we define reforms as distinct changes in the quality of the legal institutions and in the scope of regulation and separate reforms that increase economic freedom in these two areas from reforms that decrease it. We study separately how social trust, interacted with the different types of political hindrances, affects the probability of reforms. We find a dual role of social trust in the political process—facilitating liberalizing reforms and making deliberalizing ones more difficult. This suggests that trust does not make agreement on any reform more probable—the content of the reform is crucial.


Reference:
Berggren, Niclas and Christian Bjørnskov (2017), "The Market-Promoting and Market-Preserving Role of Social Trust in Reforms of Policies and Institutions". Southern Economic Journal 84(1), 3–25.

Niclas Berggren

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Ph: +46 8 665 4520
niclas.berggren@ifn.se

Christian Bjørnskov

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Ph: +45 87 16 48 19
Mob: +45 20 12 03 84
chbj@econ.au.dk

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