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Working Paper No. 144. Historical Trust Levels Predict Current Welfare State Design

PublicationWorking paper
Andreas Bergh, Christian Bjørnskov, Företagandets villkor, Förtroende, Välfärd
Working Paper No. 144.
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Abstract

Using cross-sectional data for 76 countries, we apply instrumental variable techniques based on pronoun drop, temperature and monarchies to demonstrate that historical trust levels predict several indicators of current welfare state design, including universalism and high levels of regulatory freedom. We argue that high levels of trust and trustworthiness are necessary, but not sufficient, conditions for societies to develop successful universal welfare states that would otherwise be highly vulnerable to free riding and fraudulent behavior. Our results do not exclude positive feedback from welfare state universalism to individual trust, although we claim that the important causal link runs from historically trust levels to current welfare state design.

Related content: Historical Trust Levels Predict the Current Size of the Welfare State

Bergh, A. & Bjørnskov, C. (2009). Historical Trust Levels Predict Current Welfare State Design. Ratio Working Paper No. 144.

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Working Paper No. 144. Historical Trust Levels Predict Current Welfare State Design
Working paperPublication
Bergh, A. & Bjørnskov, C.
Publication year

2009

Abstract

Using cross-sectional data for 76 countries, we apply instrumental variable techniques based on pronoun drop, temperature and monarchies to demonstrate that historical trust levels predict several indicators of current welfare state design, including universalism and high levels of regulatory freedom. We argue that high levels of trust and trustworthiness are necessary, but not sufficient, conditions for societies to develop successful universal welfare states that would otherwise be highly vulnerable to free riding and fraudulent behavior. Our results do not exclude positive feedback from welfare state universalism to individual trust, although we claim that the important causal link runs from historically trust levels to current welfare state design.

Related content: Historical Trust Levels Predict the Current Size of the Welfare State

Working Paper No. 144. Historical Trust Levels Predict Current Welfare State Design
Working paperPublication
Bergh, A. & Bjørnskov, C.
Publication year

2009

Abstract

Using cross-sectional data for 76 countries, we apply instrumental variable techniques based on pronoun drop, temperature and monarchies to demonstrate that historical trust levels predict several indicators of current welfare state design, including universalism and high levels of regulatory freedom. We argue that high levels of trust and trustworthiness are necessary, but not sufficient, conditions for societies to develop successful universal welfare states that would otherwise be highly vulnerable to free riding and fraudulent behavior. Our results do not exclude positive feedback from welfare state universalism to individual trust, although we claim that the important causal link runs from historically trust levels to current welfare state design.

Related content: Historical Trust Levels Predict the Current Size of the Welfare State

Historical Trust Levels Predict the Current Size of the Welfare State
Artikel (med peer review)Publication
Bergh, A. & Bjørnskov, C.
Publication year

2011

Abstract

Despite the fact that large welfare states are vulnerable to free-riding, the idea that universal welfare states lead to higher trust levels in the population has received some attention and support among political scientists recently. This paper argues that the opposite direction of causality is more plausible, i.e. that populations with higher trust levels are more prone to creating and successfully maintaining universal welfare states with high levels of taxation where publicly financed social insurance schemes.

The hypothesis is tested using instrumental variable techniques to infer variations in trust levels that pre-date current welfare states, and then using the variation in historical trust levels to explain the current size and design of the welfare state, and finally comparing the explanatory power of trust to other potential explanatory factors such as left-right ideology and economic openness.

To infer variation about historical trust levels, we use three instruments, all used previously in the trust literature: the grammatical rule allowing pronoun-drop, average temperature in the coldest month and a dummy for constitutional monarchies. Using cross-sectional data for 77 countries, we show that these instruments are valid and that countries with higher historical trust levels have significantly higher public expenditure as a share of GDP and also have more regulatory freedom. This finding is robust to controlling for several other potential explanations of welfare state size.

Related content: Working Paper No. 144

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