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Competition Builds Trust

Author

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  • Francois, Patrick
  • Fujiwara, Thomas
  • van Ypersele, Tanguy

Abstract

This paper shows that (firm-level) competition has a positive impact on (individual-level) trust. Using US states’ banking de-regulation from the mid 1970s, we first show that an increase in competition had a causal impact on trust, measured in the General Social Survey (GSS). We develop a model which explains why increased competition within a state increases trust. The model also predicts a positive correlation between trust and sectoral competitiveness in the cross-section. We explore this implication using the 2004 wave of the GSS which we match with US census of firms competition measures. The model’s predictions are strongly borne out.

Suggested Citation

  • Francois, Patrick & Fujiwara, Thomas & van Ypersele, Tanguy, 2009. "Competition Builds Trust," Economics working papers patrick_francois-2009-65, Vancouver School of Economics, revised 02 Dec 2009.
    • Handle: RePEc:ubc:bricol:patrick_francois-2009-65
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    File URL: http://www.econ.ubc.ca/fpatrick/COMPET_TRUST_NOV18FINAL.pdf
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    Citations

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    Cited by:

    1. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    2. Luigi Guiso, 2012. "Trust & Insurance Markets," EIEF Working Papers Series 1207, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2012.
    3. Nana Adrian & Ann-Kathrin Crede & Jonas Gehrlein, 2019. "Market Interaction and the Focus on Consequences in Moral Decision Making," Diskussionsschriften dp1905, Universitaet Bern, Departement Volkswirtschaft.
    4. repec:spo:wpmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS
    5. Hiller, Victor & Verdier, Thierry, 2014. "Corporate culture and identity investment in an industry equilibrium," Journal of Economic Behavior & Organization, Elsevier, vol. 103(C), pages 93-112.
    6. Michael T. Rauh & Giulio Seccia, 2014. "Honesty and Trade," Working Papers 2014-06, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    7. Ho-Kong Chan & Kit-Chun Lam & Pak-Wai Liu, 2011. "The Structure of Trust in China and the U.S," Journal of Business Ethics, Springer, vol. 100(4), pages 553-566, June.
    8. repec:hal:spmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS

    More about this item

    Keywords

    Trust;

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