Working Paper No. 705

Trust and Growth: A Shaky Relationship

Published: May 24, 2007Pages: 19Keywords: Trust; Growth; Robustness; Social Capital; OutliersJEL-codes: O40; Z13

Trust and Growth: A Shaky Relationship Niclas Berggren, Mikael Elinder and Henrik Jordahl


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.

 

Niclas Berggren

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

Henrik Jordahl

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Ph: +46 8 665 4533
Mob: +46 70 938 3858
henrik.jordahl@ifn.se

Mikael Elinder

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Ph: +46 18 471 1565
Mob: +46 70 769 0976
mikael.elinder@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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