A Note on the Theory and Measurement of Trust in Explaining Differences in Economic Growth

This paper takes issue with the trend to attribute differences in economic growth rates to differences in interpersonal trust. I discuss the World Values Survey (WVS) measure that is used to operationalise trust at the macro level. I hypothesise that there is a mismatch between the theoretical argument and the empirical operationalisation of trust. Instead of measuring trust, the WVS measure may instead proxy the well-functioning of institutions. I provide circumstantial evidence for this thesis by a principal components analysis of trust and institutions and a robustness test of Zak and Knack's (2001. Trust and growth, Economic Journal, vol. 111, 295--321) seminal study on trust and economic growth. Copyright 2006, Oxford University Press.

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