Institutional Quality and Generalized Trust: A Nonrecursive Causal Model
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This paper investigates the association between institutional quality and generalized trust. Despite the importance of the topic, little quantitative empirical evidence exists to support either unidirectional or bidirectional causality for the reason that cross-sectional studies rarely model the reciprocal relationship between institutional quality and generalized trust. Using data from the World Values Survey, World Bank, and other data sources in an identified nonrecursive structural equation model, results show that generalized trust and institutional quality form a positive reciprocal relationship, where the connection is stronger from generalized trust to institutional quality. The conclusion discusses implications for theory and policy in this area.
KeywordsInstitutional quality Generalized trust Endogeneity bias Feedback effect Structural equation model
I thank Maria Grigoryeva, Jerald Herting, Edgar Kiser, and Margaret Levi for helpful conversations. I also gratefully acknowledge Alex Michalos and the anonymous reviewers for valuable suggestions and comments. Any errors, as always, are my own.
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