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Formal Institutions and the Trust Formation Process: A Psychological Approach to Explain the Relationship between Institutions and Interpersonal Trust

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  • Tamilina, Larysa
  • Tamilina, Natalya

Abstract

While formal institutions are recognized as having an effect on trust formation, no theoretical or empirical models exist to formalize this relationship. This study introduces a new conceptual framework to explain trust building by individuals and the role that formal rules and laws may play in this process. Drawing on a social-cognitive theory of psychology, we present trust as composed of internal, interpersonal, and external components with the latter encompassing formal institutions. We further demonstrate that there are three mechanisms – sanction, legitimacy, and autonomy – through which formal institutions may affect trust levels either directly or indirectly. These propositions are tested empirically based on the European Social Survey data (2004) by using a variety of statistical techniques. Our empirical analysis demonstrates evidence of heterogeneity in institutional effects on trust, suggesting that the autonomy dimension of the institutional framework is particularly important for trust formation processes.

Suggested Citation

  • Tamilina, Larysa & Tamilina, Natalya, 2013. "Formal Institutions and the Trust Formation Process: A Psychological Approach to Explain the Relationship between Institutions and Interpersonal Trust," MPRA Paper 49812, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49812
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    References listed on IDEAS

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    More about this item

    Keywords

    interpersonal trust; formal institutions; social-cognitive psychology; heterogeneity; trust formation process;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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