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Regulation and Distrust

Author

Listed:
  • Philippe Aghion

    (Department of Economics, Harvard University)

  • Yann Algan

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

  • Pierre Cahuc

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Andrei Shleifer

    (Department of Economics, Harvard University)

Abstract

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.

Suggested Citation

  • Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2009. "Regulation and Distrust," Working Papers hal-00972819, HAL.
    • Handle: RePEc:hal:wpaper:hal-00972819
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-00972819
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    References listed on IDEAS

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    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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