A Blessing and a Curse? Political Institutions in the Growth and Decay of Generalized Trust: A Cross-National Panel Analysis, 1980–2009

Abstract

Despite decades of research on social capital, studies that explore the relationship between political institutions and generalized trust-a key element of social capital-across time are sparse. To address this issue, we use various cross-national public-opinion data sets including the World Values Survey and employ pooled time-series OLS regression and fixed- and random-effects estimation techniques on an unbalanced panel of 74 countries and 248 observations spread over a 29-year time period. With these data and methods, we investigate the impact of five political-institutional factors-legal property rights, market regulations, labor market regulations, universality of socioeconomic provisions, and power-sharing capacity-on generalized trust. We find that generalized trust increases monotonically with the quality of property rights institutions, that labor market regulations increase generalized trust, and that power-sharing capacity of the state decreases generalized trust. While generalized trust increases as the government regulation of credit, business, and economic markets decreases and as the universality of socioeconomic provisions increases, both effects appear to be more sensitive to the countries included and the modeling techniques employed than the other political-institutional factors. In short, we find that political institutions simultaneously promote and undermine generalized trust.