Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 102: Trust and Economic Growth: Conflicting Results between Cross-Sectional and Panel Analysis

Felix Roth ()
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Felix Roth: University of Göttingen

Abstract: This paper examines the relationship between trust and economic growth. With the help of panel data I conclude that economic growth is negatively related to an increase in trust. My result is contrary to works taking a cross section design in which trust is positively related to growth. The relationship is tested in the context of EU countries, OECD countries, transition countries and developing countries. Interpersonal trust and systemic trust is differentiated.

Keywords: Social Capital; Trust; Economic Growth; Panel Analyis

JEL-codes: C23; E01; O40; Z13

22 pages, First version: August 30, 2006. Revised: November 15, 2006. Earlier revisions: November 15, 2006.

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