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Regulation and Distrust

Abstract : We document that, in a cross section of countries, government regulation is strongly negatively correlated with measures of trust. In a simple model explaining this correlation, distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust, leading to multiple equilibria. A key implication of the model is that individuals in low-trust countries want more government intervention even though they know the government is corrupt. We test this and other implications of the model using country- and individual-level data on trust and beliefs about the role of government, as well as on changes in beliefs during the transition from socialism.
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Submitted on : Friday, December 10, 2021 - 8:23:32 AM
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Philippe Aghion, yann Algan, Pierre Cahuc, Andrei Shleifer. Regulation and Distrust. Quarterly Journal of Economics, Oxford University Press (OUP), 2010, 125 (3), pp.1015 - 1049. ⟨10.1162/qjec.2010.125.3.1015⟩. ⟨hal-03384665⟩

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