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Is International Trade Relevant to Social Trust Formation? Evidence from Cross-country Analysis

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  • Robert Riley
  • Luz Saavedra

Abstract

In this paper, we investigate whether international trade itself can contribute to the level of generalized trust. We extend the existing empirical research in several ways. First, we use a larger sample size, we test and reject the treatment of international trade as an exogenous variable, and we address trade endogeneity using instrumental variables estimators. Second, we use geographical variables and international trade prices to instrument for international trade. Third, we perform instrumental variables diagnostics tests to determine the suitability and relevance of our instruments; we also perform tests of the statistical significance of our parameter of interest that are robust to the presence of weak instruments. Our empirical analysis suggests that international trade does have a significant and relatively large positive effect on social trust and reconfirms the role played by other variables like income inequality in the formation of trust found in the literature.

Suggested Citation

  • Robert Riley & Luz Saavedra, 2019. "Is International Trade Relevant to Social Trust Formation? Evidence from Cross-country Analysis," International Economic Journal, Taylor & Francis Journals, vol. 33(2), pages 189-211, April.
    • Handle: RePEc:taf:intecj:v:33:y:2019:i:2:p:189-211
    DOI: 10.1080/10168737.2019.1585471
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    Cited by:

    1. Yanjun Ma & Churen Sun, 2023. "Trade liberalization, institutional quality, and social trust of Chinese residents," Empirical Economics, Springer, vol. 65(3), pages 1453-1486, September.

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