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Regulation and Distrust

Philippe Aghion 1, Yann Algan 2, Pierre Cahuc 3, Andrei Shleifer 1

(2009-06-17)

In a cross-section of countries, government regulation is strongly negatively correlated with social capital. We document this correlation, and present a model explaining it. In the model, distrust creates public demand for regulation, while regulation in turn discourages social capital accumulation, leading to multiple equilibria. A key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt. We test this and other implications of the model using country- and individual-level data on social capital and beliefs about government's role, as well as on changes in beliefs and in trust during the transition from socialism.

1:	Department of Economics, Harvard University
	(-)
2:	Observatoire Français des Conjonctures économiques (OFCE)
	Institut d'Études Politiques [IEP] - Paris – Fondation Nationale des Sciences Politiques [FNSP]
3:	Department of Economics, Ecole Polytechnique
	CNRS : UMR7176 – Polytechnique - X

Subject

:

Humanities and Social Sciences/Economy and finances Humanities and Social Sciences/Political science

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From: Department Of Economics <>

Submitted on: Wednesday, 17 June 2009 13:39:27

Updated on: Wednesday, 17 June 2009 14:37:08