The Impact of Trust on Reforms

25 Pages Posted: 1 Sep 2008 Last revised: 9 Sep 2008

See all articles by Friedrich Heinemann

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research; University of Heidelberg - Alfred Weber Institute for Economics

Benjamin Tanz

ZEW – Leibniz Centre for European Economic Research

Date Written: August 1, 2008

Abstract

In a constantly changing economic environment a country's ability to undertake institutional reforms is crucial to maintain economic growth and to promote the welfare of its citizens. A wide range of determinants for institutional reforms have been identified. However, the impact of trust on reforms has so far never been addressed. We provide theoretical arguments why trust should influence institutional changes and test the relationship empirically. We find a significant positive relation between trust and reforms with regard to government size, the legal system, and deregulation of private businesses and the labor market. The results in other policy fields are ambiguous.

Keywords: Trust, Economic Freedom, Policy Reforms

JEL Classification: H11, E60

Suggested Citation

Heinemann, Friedrich and Tanz, Benjamin, The Impact of Trust on Reforms (August 1, 2008). ZEW - Centre for European Economic Research Discussion Paper No. 08-053, Available at SSRN: https://ssrn.com/abstract=1261858 or http://dx.doi.org/10.2139/ssrn.1261858

Friedrich Heinemann (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

HOME PAGE: http://www.zew.de

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

Benjamin Tanz

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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