Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82755
Authors: 
Berggren, Niclas
Jordahl, Henrik
Year of Publication: 
2005
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2005:2
Abstract: 
We present new evidence on how generalized trust is formed. Unlike previous studies, we look at the explanatory power of economic institutions, we use newer data, we incorporate more countries, and we use instrumental variables to handle the causality problem. A central result is that legal structure and security of property rights (area 2 of the Economic Freedom Index) increase trust. The idea is that a market economy, building on voluntary transactions and interactions with both friends and strangers within the predictability provided by the rule of law, entails both incentives and mechanisms for trust to emerge between people.
Subjects: 
social capital
trust
economic freedom
rule of law
property rights
legal system
JEL: 
K42
O40
Z13
Document Type: 
Working Paper

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