Does social trust determine the size of the welfare state? Evidence using historical identification
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Most modern welfare states offer an extensive array of services and benefits that are wholly or partly financed by tax revenue. One missing link in explaining the long-run sustainability of such comprehensive welfare states could be the already-existing stock of trust. Indeed, our cross-country results suggest that trust determines the size of welfare states as well as three features that are arguably necessary for their preservation: high levels of political confidence, strong legal institutions protecting private property rights, and low levels of bureaucratic corruption.
KeywordsSocial trust Welfare state US immigrants Historical identification
We are grateful for comments from two anonymous referees and Bill Shughart that strongly improved the paper. All remaining errors are ours.
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