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Does social trust determine the size of the welfare state? Evidence using historical identification

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Abstract

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.

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Notes

  1. In relation to the particularly high trust levels of Scandinavian welfare states, it necessarily deserves mention that trust levels in Sweden and Denmark have increased since the early 1980s, just as trust levels on average fell in the United States from the late 1960s to the early 1990s. Yet, the particular levels of trust in Scandinavia cannot be attributed to the welfare state. In one of the first individual-level panel studies of trust, Dinesen and Sønderskov (2012) find that the trust increase for Denmark mainly is the result of a less trusting generation growing up around World War II that is now dying and being replaced by their more trusting children. Furthermore, the observed trust increase has occurred in a period in which both Denmark and Sweden rolled back central elements of the social democratic welfare state, which would, following Rothstein’s arguments, have led to a trust decline. Since we note the opposite, we suggest that the evidence is inconsistent with the welfare state causing the trust increase.

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Acknowledgements

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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Authors and Affiliations

  1. Department of Economics and Business, Aarhus University, Hermodsvej 22, 8230, Åbyhøj, Denmark

    Christian Bjørnskov

  2. Department of Political Science, Aarhus University, Bartolins Allé 7, 8000, Aarhus C, Denmark

    Gert Tinggaard Svendsen

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  1. Christian Bjørnskov
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  2. Gert Tinggaard Svendsen
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Correspondence to Christian Bjørnskov.

Appendix

Appendix

Table A.1 Descriptive statistics, sources, and definitions
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Table A.2 Countries in sample
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Bjørnskov, C., Svendsen, G.T. Does social trust determine the size of the welfare state? Evidence using historical identification. Public Choice 157, 269–286 (2013). https://doi.org/10.1007/s11127-012-9944-x

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