Regulation and Distrust
We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to multiple equilibria. A key implication of the model is that individuals in low-trust countries want more government intervention even though they know the government is corrupt. We test this and other implications of the model using country- and individual-level data on trust and beliefs about the role of government, as well as on changes in beliefs during the transition from socialism.
Year of publication: |
2010
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Authors: | Aghion, Philippe ; Algan, Yann ; Cahuc, Pierre ; Shleifer, Andrei |
Institutions: | Department of Economics, Harvard University |
Saved in:
freely available
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