Publication detail

Does Trust Promote Growth?

Author(s): prof. Roman Horváth Ph.D.,
Type: IES Working Papers
Year: 2012
Number: 9
Published in: IES Working Papers 9/2012
Publishing place: Prague
Keywords: trust, economic growth, Bayesian model averaging
JEL codes: O43, O10, Z13
Suggested Citation: Horváth, R. (2012). “Does Trust Promote Growth?” IES Working Paper 09/2012. IES FSV. Charles University.
Abstract: We examine the effect of generalized trust on long-term economic growth. Unlike in previous studies, we use Bayesian model averaging to deal rigorously with model uncertainty and attendant omitted variable bias. In addition, we address endogeneity and assess whether the effect of trust on growth is causal. Examining more than forty regressors for nearly fifty countries, we show that trust exerts a positive effect on long-term growth and, based on the posterior inclusion probabilities, suggest that trust is an important driver of long-term growth. Our results also show that trust is key for growth in countries with a weak rule of law.
Downloadable: WP 2012_09_Horvath


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