Excerpt
Excerpt
Regulation and Distrust. Philippe Aghion, Andrei Shleifer, August 2010, Paper. "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..." Link