Does trust favor macroeconomic stability?

Marc Sangnier (1, 2)

1 PSE - Paris School of Economics
2 PJSE - Paris-Jourdan Sciences Economiques

This paper investigates the relationship between trust and macroeconomic volatility. In a cross section of countries, we show that higher trust is associated with lower macroeconomic instability. We use the inherited trust of Americans as an instrumental variable of trust in their origin country to overcome all potential reverse causality concerns. We use changes in inherited trust over the XXth century to show that increasing trust also decreases volatility across time. Thus, trust is shown to be an important determinant of macroeconomic stability both in space and time. Finally, we show that trust reduces investment volatility but not public expenditure volatility.

Cet article analyse la relation entre le capital social, mesuré par la confiance, et l'instabilité macroéconomique. Nous montrons que, dans l'espace, une confiance plus importante est associée à une volatilité macroéconomique plus faible. L'utilisation de la confiance héritée par les Américains de leurs ancêtres nous permet d'éviter toute causalité inverse. Nous montrons que la confiance est un important déterminant de la stabilité macroéconomique.

Mots clés: social capital; trust; volatility; macroeconomic stability

Domaines: Economies et finances

Marc Sangnier. Does trust favor macroeconomic stability?. 2009. ⟨halshs-00575021⟩