Empirical Studies on the Economic Impact of Trust

Abstract

markdownabstract__Abstract__ Generally speaking, would you say that most people can be trusted, or that you cannot be too careful when dealing with strangers?” This survey question is frequently asked to thousands of individuals globally. The aim of this question is to obtain a measure for how trusting individuals are towards people they do not know, but with whom they nonetheless interact. This thesis shows that trust has substantial economic consequences. Currently, in economics trust is often disregarded. It is difficult to reconcile trusting behavior with the classical view of ‘economic man’ as a completely rational, self-interested being. This thesis includes four studies where this behavioral assumption does not hold, however. In fact, they show that more trust is better in various dimensions. From individual income and the location decision of multinational firms to the productivity and technological development of countries: trust matters. Each study identifies how trust generates economic value, and how large the effect of trust is. Furthermore, the development of trust is modeled to explain why there exist such large differences in trust levels between individuals, regions and countries.

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