The moldable young: How institutions impact social trustAndreas Bergh, Lund university & IFNRichard Öhrvall, Liköping University & IFN

What is social trust?

• Social trust is the individual attitude or belief that “most people” can be trusted.

• Typically measured by asking

• Generally speaking, would you say that most people can be trusted or that you need to be very careful in dealing with people?

Why should we care?

• Every transaction requires trust (Arrow 1972)• Survey answers do correlate with behavior eg.

Wallet-drop experiments (Knack and Keefer, 1997) and lab experiments (Thöni et al. 2012)

• Several strong country level correlations• Using IV-estimation and US-immigration, trust

has been causally linked to• Welfare state size (Bergh&Bjørnskov 2011, Bjørnskov &

Svendsen 2012)

• Growth (Algan & Cahuc 2010)

Trust

+ +

Government size

Growth

–

?

Trust is crucial for economic development• Trust helps us understand ‘the bumble bee

paradox’ of the Nordic welfare states (Bergh & Bjørnskov 2016).

Where does trust come from? How robust is it?

• Cultural view: Trust is inherited and helps to explain institutions (Putnam 1994, Uslaner 2002).

• Institutional view: Trust is caused by impartial institutions (eg. economic freedom, rule of law, welfare state universality) (Berggren and Jordahl 2006, Kumlin & Rothstein 2005)

Namn Sida 6

Can migration inform about causality?• Nannestad et al (2014) (and more papers)• Migration from low to high trust countries• Comparisons with matched individuals• Find substantial (yet incomplete) adjustment of

trust upwards.

Example

Our contribution

• Examine the impact of institutions on trust• Using survey data on Swedish expats around

the world• In countries with inferior institutions, time spent

in the new country should associate negatively with trust

• Reverse causality implausible• Self-selection potentially problematic

Self-selection

• Swedish expats are a highly trusting sub-sample of a highly trusting population

• If self-selection is similar over time, time spent in the new country gives an exogenous variation in exposure to the new country

• We can also test our controls to see if they capture why expats are more highly trusting

• (they do. It’s about subjective health)

Social trust over time in Sweden

Data

• Email survey by the Swedish SOM-institute to expats 18 and 75 years of age.

• Representative sample, 27% response rate -> 2,668 answers, our baseline.

• 57 percent reside in the 12 most common countries,

• the rest scattered in 98 other different countries.

Share of respondents

Share of emigrants 2014

Norway 9 11.4USA 9 6.3UK 8 7.1Germany 5 4.8Schwitzerland 5 1.3Denmark 4 8.2France 4 1.7Spain 3 2.4Finland 3 5.1Thailand 3 1.4Australia 2 1.9Brazil 2 0.4

Table 1. Residence of Swedish expatriatesSource: The SOM Insitute’s Swedish Expatriate Survey 2014.

Expats 0.3 units more trusting (0-10 scale), driven entirely by better subjective health.

  ModelVariables  (1) (2) (3) (4)         Expatriate 0.32* 0.31* 0.08 -0.09

(0.17) (0.18) (0.17) (0.18)High education

0.77*** 0.65*** 0.61***

(0.07) (0.06) (0.11)Age/10 0.00 0.02 0.07**

(0.02) (0.02) (0.03)Age squared 0.00 0.00 -0.00*

(0.00) (0.00) (0.00)Female 0.11* 0.18*** 0.17

(0.07) (0.06) (0.11)Married 0.43*** 0.33*** 0.15

(0.08) (0.08) (0.14)Employed 0.39*** 0.03 -0.04

(0.14) (0.13) (0.24)Unemployed -0.68*** -0.76*** -0.72*

(0.23) (0.22) (0.38)Retired -0.06 -0.29* -0.28

(0.18) (0.17) (0.31)Left-right position

-0.01 -0.06** 0.03

(0.03) (0.03) (0.05)Health status 0.31*** 0.31***

(0.02) (0.03)Religious -0.23**

(0.11)Constant 6.65*** 5.21*** 2.99*** 2.16***

(0.03) (0.39) (0.39) (0.69)

Observations 4,602 4,225 4,206 1,412R2 0.00 0.07 0.15 0.15

Main analysis!

• Is trust lower for those who have lived longer in a country with

• More (perceived) corruption? (Transparency International)

• Less economic freedom? (Fraser institute)• Less average social trust? (WVS/EVS et cet)

• Analysis using interaction effects and by dividing the sample in to ‘best’, medium and ‘worst’ institutions.

Results:

• Interacting time with institutional indicator suggest that institutions do affect trust, but the effect is really small.

• Splitting the sample into thirds suggest the same results, and the effect is only visible in the ‘worst’ third of the countries.

Trust of expats who have moved to the most corrupt third of the countries

Comparison

Next:

Divide sample into older and younger then 30 at arrival

Summary

• Yes, institutions can destroy social trust• Affects only the young• Happens during the first 5 years• The effect is very small (1/3 std deviation)

• Swedish expats who have lived 30+ years in the most corrupt countries, are still as trusting as Swedes in Sweden

• Kumlin, Staffan and Bo Rothstein. 2005. "Making and Breaking Social Capital: The Impact of Welfare-State Institutions." Comparative Political Studies 38(4):339-65.

• Uslaner, Eric M. 2002. The Moral Foundations of Trust. Cambridge: Cambridge University Press. • Berggren, Niclas and Henrik Jordahl. 2006. "Free to Trust: Economic Freedom and Social Capital." Kyklos

59(2):141-69. doi: 10.1111/j.1467-6435.2006.00324.x. • Arrow, Kenneth J. 1972. "Gifts and Exchanges." Philosophy & Public Affairs 1(4):343-62. • Thöni, Christian, Jean-Robert Tyran and Erik Wengström. 2012. "Microfoundations of Social Capital."

Journal of Public Economics 96(7–8):635-43. • Bergh, Andreas and Christian Bjørnskov. 2011. "Historical Trust Levels Predict the Current Size of the

Welfare State." Kyklos 64(1):1-19.• Bjørnskov, Christian and GertTinggaard Svendsen. 2012. "Does Social Trust Determine the Size of the

Welfare State? Evidence Using Historical Identification." Public Choice:1-18.• Algan, Yann and Pierre Cahuc. 2010. "Inherited Trust and Growth." American Economic Review

100(5):2060-92.• Putnam, Robert D., Robert Leonardi, och Raffaella Y. Nanetti. 1994. Making Democracy Work: Civic

Traditions in Modern Italy. Princeton University Press.• Nannestad, Peter, Gert Tinggaard Svendsen, Peter Thisted Dinesen and Kim Mannemar Sønderskov.

2014. "Do Institutions or Culture Determine the Level of Social Trust? The Natural Experiment of Migration from Non-Western to Western Countries." Journal of Ethnic & Migration Studies 40(4):544-65.