PSE - Paris-Jourdan Sciences Economiques
(Joint research unit CNRS-EHESS-ENPC-ENS), Paris

This paper investigates the relationship between trust and macroeconomic volatility. In a cross section of countries, we show that higher trust is associated with lower macroeconomic instability. We use the
inherited trust of Americans as an instrumental variable of trust in their origin country to overcome all potential reverse causality concerns. We use changes in inherited trust over the XXth century to show that increasing trust also decreases volatility across time. Thus, trust is shown to be an important determinant of macroeconomic stability both in space and time. Finally, we show that trust reduces investment volatility but not public expenditure volatility.

Keywords : Social capital, trust, volatility, macroeconomic stability.

JEL classification : E02, E30, N10.

Cet article analyse la relation entre le capital social, mesuré par la confiance, et l'instabilité macroéconomique. Nous montrons que, dans l'espace, une confiance plus importante est associée à une volatilité macroéconomique plus faible. L'utilisation de la confiance héritée par les Américains de leurs ancêtres nous permet d'éviter toute causalité inverse. Nous montrons que la confiance est un important déterminant de la stabilité macroéconomique.

Creation : October 2009

Revision : September 2010