(May 2011) On Trust and Development: The Case of the Sub-prime Crises

On Trust and Development: The Case of the Sub-prime Crises image

While trust is generally associated with stronger economic performance, this paper presents evidence that in case of economic crises - countries with high levels of trust (i.e., excessive trust) are more vulnerable than countries with moderate levels of trust. Following a theoretical development of the concept "excessive trust" we econometrically estimate the correlation between trust level and economic growth in 2009 using cross-section data of countries worldwide. We use indicators of trust from the World Value Survey and the International Social Survey Program. For Growth examination we use the World Bank data.