Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/175056
Authors: 
Bergh, Andreas
Bjørnskov, Christian
Year of Publication: 
2016
Series/Report no.: 
IFN Working Paper 1119
Abstract: 
High levels of social trust has been linked to both public sector size and long term economic growth, thereby helping to explain how some countries are able to combine high taxes and relatively high levels of economic growth. This paper examines if social trust as a background factor also insulates countries against negative effects of public sector size on growth, as government size and growth are found to be negatively associated in several recent studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find little robust evidence of insulating effects. Instead we find robust evidence that high trust aggravates the crowding out effects of public sector size on private investments.
Subjects: 
trust
economic growth
government consumption
JEL: 
H10
O11
P16
Z10
Document Type: 
Working Paper
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