Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 60: Trust and Growth in the 1990s: A Robustness Analysis

Mikael Bengtsson , Niclas Berggren () and Henrik Jordahl
Additional contact information
Mikael Bengtsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Niclas Berggren: The Ratio Institute, Postal: P.O. Box 5095, SE-102 42 Stockholm, Sweden
Henrik Jordahl: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden, and, The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: We conduct an extensive robustness analysis of the relationship between trust and growth for a later time period (the 1990s) and with a bigger sample (63 countries) than previous studies. In addition to robustness tests that focus on model uncertainty, we use Least Trimmed Squares, a robust estimation technique, to identify outliers and investigate how they affect the results. We find that the trust-growth relationship is less robust with respect to empirical specification and to countries in the sample than previously claimed, and that outliers affect the results. Nevertheless trust seems quite important compared with many other growth-regression variables.

Keywords: trust; growth; robustness analysis; extreme bounds analysis; social capital; least trimmed squares; outliers

JEL-codes: O40; Z13

30 pages, January 3, 2005

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mb_nb_hj_trust.pdf PDF-file 

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