Scandinavian Working Papers in Economics
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Research Institute of Industrial Economics (IFN) Working Paper Series

No 705:
Trust and Growth: A Shaky Relationship

Niclas Berggren (), Mikael Elinder () and Henrik Jordahl ()

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; (follow links to similar papers)

JEL-Codes: O40; Z13; (follow links to similar papers)

19 pages, May 24, 2007

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This paper is published as:
Berggren, Niclas, Mikael Elinder and Henrik Jordahl, (2008), 'Trust and Growth: A Shaky Relationship', Empirical Economics, Vol. 35, No. 2, pages 251-274

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