Working Paper: CEPR ID: DP8308
Authors: Betsey Stevenson; Justin Wolfers
Abstract: We document that trust in public institutions--and particularly trust in banks, business and government--has declined over recent years. U.S. time series evidence suggests that this partly reflects the pro-cyclical nature of trust in institutions. Cross-country comparisons reveal a clear legacy of the Great Recession, and those countries whose unemployment grew the most suffered the biggest loss in confidence in institutions, particularly in trust in government and the financial sector. Finally, analysis of several repeated cross-sections of confidence within U.S. states yields similar qualitative patterns, but much smaller magnitudes in response to state-specific shocks.
Keywords: banks; big business; confidence; congress; courts; institutions; media; survey data; trust
JEL Codes: D72; E32; E65; K0; P52; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unemployment rate (J64) | Trust in institutions (O43) |
| Unemployment rate (J64) | Trust in banks (G21) |
| Unemployment rate (J64) | Trust in government (H11) |
| Unemployment rate (J64) | Trust in big business (L14) |
| Rising unemployment (F66) | Declining trust (Z13) |
| Countries with largest increases in unemployment (F66) | Steepest declines in trust (Z13) |
| Cyclicality of trust (E32) | Economic downturns (E32) |