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Does social distrust always lead to a stronger support for government intervention?

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Abstract

The paper considers ‘trust’ as an empirical determinant of individual support for government intervention. The central notion is that the influence of generalized trust on policy attitudes is conditional on confidence in both state actors and major companies. The starting point is the idea that individuals who generally distrust other persons have a stronger taste for the regulation of economic activities, while people with high interpersonal trust are in favor of less stringent regulatory control. Yet, people who do not trust unknown others also tend to mistrust government and private companies. If mistrust in state actors dominates, we should not necessarily expect stronger interventionist preferences. Estimating the determinants of interventionist attitudes using data from the World Values Survey/European Values Study for approximately 130,000 individuals in forty OECD- and EU-countries, we find evidence that the impact of social trust on government intervention attitudes is conditional on institutional trust. Confidence in major companies appears to have a stronger effect on preference formation than trust in state actors.

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Notes

  1. We also use the three terms interchangeably.

  2. Evidence on positive growth effects of social trust is somehow challenged by work from Berggren et al. (2008). Employing a fixed effects panel estimation, Roth (2009) even finds growth to be negatively related to an increase in interpersonal trust.

  3. In a similar spirit, Carlin et al. (2009) derive a theoretical model of the relationship between trust and financial market regulation. They also arrive at two types of equilibria, one, in which government regulation is a strict substitute for public trust but may restrain growth, and one, in which regulation may be supportive of growth and development because intervention complements public trust.

  4. The basic attitude question is formulated as “Now I’d like you to tell me your views on various issues. How would you place your views on this scale? 1 means you agree completely with the statement on the left; 10 means you agree completely with the statement on the right; and if your views fall somewhere in between, you can choose any number in between”. All items were polled for the first time in 1989–1990.

  5. We are grateful to an anonymous referee who pointed this out very clearly.

  6. In cases in which one of the respective confidence variables is missing, we calculated the mean of available data. This appears to be justified as confidence measures are highly correlated (between +0.42 and +0.63) at the individual level.

  7. Expert assessments of governance quality, as measured by World Bank’s Worldwide Governance Indicators, and country averages of our trust-in-state variable are correlated at a 1 %-confidence level.

  8. Individual covariates X include gender, age, household income decile, and employment status (self-employed, unemployed). All variables are obtained from WVS/EVS. As macro controls Z, we include the unemployment rate (from Eurostat/OECD statistics) and (the log of) real GDP per capita (in PPP) from Penn World Tables 8 (Feenstra et al. 2013), lagged 1 year. Summary statistics of all variables can be found in Table A2 of the Appendix.

  9. We also considered ordered probit, but opted for OLS for two reasons: (1) Owing to averaging, the composite government-intervention index has many more than just 10 steps (as the base variables forming the index). (2) The introduction and interpretation of interaction variables is far easier in OLS than in ordered probit.

  10. As standardized government intervention is demeaned already, we do not employ country fixed effects in Panel B.

  11. The complete results for Panel B including all covariates are shown in the Appendix, Table A4.

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Acknowledgments

The research leading to these results has received funding from the European Commission’s Seventh Framework Programme FP7/2007-2013 under Grant agreement no. 290647. The authors thank participants of the Economics Research Colloquiums at Kassel University (Germany, November 2013) and at the University of Münster (Germany, January 2014), as well as session participants at the Australasian Public Choice Society Meeting in Singapore (December 2013), and the Meeting of the European Public Choice Society in Cambridge/UK (April 2014) for helpful comments. We owe special thanks to Christian Bjørnskov, Chris Doucouliagos, Pietro Tommasino, and three anonymous referees for very helpful comments. The usual caveat applies.

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Authors and Affiliations

  1. Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, 1030, Vienna, Austria

    Hans Pitlik

  2. Faculty of Business and Economics, Mendel University, Zemědělská 1, 61300, Brno, The Czech Republic

    Ludek Kouba

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  1. Hans Pitlik
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Correspondence to Hans Pitlik.

Appendix

Appendix

See Tables 3, 4, 5, and 6 and Fig. 4

Table 4 Descriptive statistics
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Table 5 t tests of sample mean differences at the individual level
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Table 6 (Table 1 Panel B, standardized government intervention attitude, including covariates)
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Fig. 4
figure 4figure 4

Distribution of interventionist attitudes in the whole sample. a Government intervention attitude. b State ownership attitude. c Government responsibility attitude. d Competition attitude

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Pitlik, H., Kouba, L. Does social distrust always lead to a stronger support for government intervention?. Public Choice 163, 355–377 (2015). https://doi.org/10.1007/s11127-015-0258-7

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