Do Corruption and Social Trust Affect Economic Growth? A Review

Abstract

Two separate literatures suggest that corruption and social trust, respectively, are related to economic growth, although the strengths of the relationships, and the direction of causality, are still debated. This paper reviews these literatures and evaluates the evidence for causal effects of corruption and trust on economic growth, and discusses how corruption and trust are interrelated. The reviews show that absence of corruption and high levels of social trust foster economic growth. The literatures also indicate that corruption has a causal effect on social trust, while the opposite effect is more uncertain. The conclusion offers the suggestion that fighting corruption may yield a “double dividend”, as reduced corruption is likely to have both direct and indirect effects on growth.     

Trusting the State,Trusting Each Other? The Effect of Institutional Trust on Social Trust

Trust in state institutions is a prominent explanation of social trust. However, previous—mainly cross-sectional—analyses provide limited causal evidence regarding the relationship between institutional trust and social trust and it is thus essentially unknown whether an observed relationship reflects reverse causality (social trust forming institutional trust), or both forms of trust reflecting deep-seated dispositions (common confounding). Against the backdrop of the shortcomings of previous cross-sectional analyses, this paper utilizes two Danish panel surveys containing measures of both types of trust for the same individuals surveyed at multiple points in time over a long time-span (up to 18 years) to address the potentially reverse and/or spurious relationship. Using individual fixed effects and cross-lagged panel models, the results provide strong evidence of trust in state institutions exercising a causal impact on social trust, whereas the evidence for a reverse relationship is limited.     

Solid or Flexible? Social Trust from Early Adolescence to Young Adulthood

The belief that people are generally fair and trustworthy has generated plenty of scholarly attention in recent decades, particularly in the Scandinavian countries, which are often known for high levels of social trust. This article draws attention to the current discussion in the literature on whether social trust is a stable cultural trait marked by persistence or is based on experiences and subject to change throughout life. Based on unique longitudinal data from five different cohorts of young people in Sweden, ranging in age from 13 to 28 years, this article provides an empirical contribution on how social trust develops over time. The results show that there is a greater degree of instability in social trust between 13 and 15 years of age than in other age groups, and that social trust appears to stabilize with age. Findings also indicate that there are substantial inter‐individual differences in social trust among young people within the same age group, both in initial levels and in the rates of change over time. The article concludes that although social trust is relatively stable it tends to crystallize in early adulthood, highlighting the relevance of the impressionable‐years hypothesis.     

When Does Diversity Erode Trust? Neighborhood Diversity, Interpersonal Trust and the Mediating Effect of Social Interactions

This article contributes to the debate about the effects of ethnic diversity on social cohesion, particularly generalized trust. The analysis relies on data from both the 'Citizenship, Involvement, Democracy' (CID) survey in the US and the 'Equality, Security and Community Survey' (ESCS) in Canada. Our analysis, one of the first controlled cross-national comparisons of small-unit contextual variation, confirms recent findings on the negative effect of neighborhood diversity on white majorities across the two countries. Our most important finding, however, is that not everyone is equally sensitive to context. Individuals who regularly talk with their neighbors are less influenced by the racial and ethnic character of their surroundings than people who lack such social interaction. This finding challenges claims about the negative effects of diversity on trust – at least, it suggests that the negative effects so prevalent in existing research can be mediated by social ties.     

Is Ethnic Diversity Bad for Any Dimension of Social Capital? Trust,Networks and Voluntarism in Norwegian Communities

Ethnic diversity has been posed as a threat to social capital, but results from existing research are inconclusive. This study takes as its starting point that different aspects of social capital may be influenced differently by ethnic diversity and uses one specific welfare state context – Norway – to explore such variations. Analysing an original dataset, nine different measures are used to explore three dimensions of social capital in 61 communities in Norway, amongst the majority population and residents with immigrant background. The results suggest, first, a differentiated impact of ethnic heterogeneity on trust. Ethnic diversity is negatively associated with spatially bounded forms of trust, but not with generalized trust. Second, a negative association with traditional forms of voluntarism is found – albeit this latter relationship is much weaker than the former. Third, the results suggest that these relationships are fairly similar across different (immigrant) groups. Although residents with immigrant background typically express lower levels of generalized trust than the majority population, the relative differences between residents living in diverse or homogeneous communities are limited. Given its strong institutions Norway could be seen as a least likely case for studying the impact of ethnic diversity on social capital. On the one hand, effects are more limited than what has been found in studies from the United States. On the other hand, the fact that effects are found on community trust and volunteering indicates that this type of societal model can indeed be affected by ethnic diversification.     

Do Group Decision Rules Affect Trust? A Laboratory Experiment on Group Decision Rules and Trust

Enhanced participation has been prescribed as the way forward for improving democratic decision making while generating positive attributes like trust. Yet we do not know the extent to which rules affect the outcome of decision making. This article investigates how different group decision rules affect group trust by testing three ideal types of decision rules (i.e., a Unilateral rule, a Representative rule and a ‘Non‐rule’) in a laboratory experiment. The article shows significant differences between the three decision rules on trust after deliberation. Interestingly, however, it finds that the Representative rule yields more trust than the Non‐rule and also significantly more trust than the Unilateral rule, when analysing the results at group level. These findings challenge the theoretical understanding by, for example, deliberative normative theorists that more inclusive, consensual and non‐hierarchical decision‐making procedures enhance trust vis‐à‐vis other more hierarchical decision‐making procedures.     

Taken for Granted? Managing for Social Equity in Grant Programs

Managing for social equity performance has long been a goal without much guidance for public managers. We examine social equity performance in the context of indirect governance through the administration of grant programs and, more specifically, the matching of policy responses (grant funding) to social needs. Grant program managers must allocate funding to match needs while also ensuring accountability, but common administrative models that rely on competition can undermine social equity performance. We develop a unique framework to analyze the relative social equity performance of four models of grant administration in general. These models are defined by whether competitions or formulas are used to select grantees and to allocate funding. We test the implications of the framework in an analysis of funding distributions from the nonentitlement Community Development Block Grant program in four states. Our findings suggest that social equity in grant programs is better served when grantors do not rely solely on competitive grant contracting in the selection and distribution of grant funds, which is typical in grant administration. However, policy makers and managers can design institutional arrangements that utilize competition, but in a manner that does not create a bias against more socially equitable funding decisions.     

Is Multiculturalism Bad for Social Cohesion and Redistribution?

Multiculturalism as an official policy strategy has recently come in for significant criticism in a number of Western European countries. A key criticism is that multicultural policies undermine redistribution policies, since they would erode the social cohesion upon which redistribution measures are built. However, empirical research does not univocally confirm this critique. This article explains why this is the case. The first argument is called the integration‐recognition paradox. Policies that focus on recognising minority groups may lead to a greater social acceptance of those minorities, and in turn may lead to their feeling more appreciated as participants in society. In a second argument, the authors discuss how multicultural policies could easily be combined with policies that invest in national unity and social cohesion.     

A Trojan Horse? Unionism, Trust and Truth-telling in Northern Ireland

The aim of this article is to examine the relationship betweentrust, testimony and truth recovery processes as part of post-conflicttransition. The paper uses the case study of unionist attitudestoward a community-based truth-telling project in Northern Irelandto demonstrate the impact an absence of trust can have uponwhat the French philosopher Paul Ricoeur has described as the‘space of controversy’ that emerges between the‘certification’ and the ‘accreditation’of testimony. The paper suggests such distrust is a legacy,not only of conflict, but also of the particular circumstancesof transition and the specific mechanisms of truth recoveryadopted. Ultimately the paper argues for a holistic, community-centredapproach towards truth-telling and raises issues relevant toother violently divided societies undergoing transition andgrappling with ways in which to deal with the legacy of politicalconflict.     

Do Social Rights Affect Social Outcomes?

While the United Nations and NGOs are pushing for global judicialization of economic, social, and cultural rights (ESCRs), little is known of their consequences. We provide evidence of the effects of introducing three types of ESCRs into the constitution: the rights to education, health, and social security. Employing a large panel covering annual data from 160 countries in the period 1960–2010, we find no robust evidence of positive effects of ESCRs. We do, however, document adverse medium‐term effects on education, inflation, and civil rights.     

Corporatism and Social Trust: Bringing Voluntary Organizations ‘Back In’

Abstract

In analyses of the sources of social trust, it has been found that voluntary organizations have no effect upon it. Such analyses have overlooked the role of civil society organizations as intermediary structures between the citizen and the state. This article explores how organizations, linked together in corporatist networks, help generate trust. Two mechanisms for this are pointed out. First, in societies with strong corporatist networks conflicts between employers and employees are perceived as less strong than in societies with weak corporatist networks. Second, as societies with strong corporatist networks also are more egalitarian, conflicts between rich and poor are also perceived as less pronounced than in societies with weak corporatist networks. This analysis provides definite indications that the perception of conflicts between workers and managers, and the perception of conflicts between rich and poor are intermediary variables between corporatism and social trust, and thus supports the hypothesis that voluntary organizations, through corporatist networks of negotiation and coordination, contribute to the growth of social trust.     

Trust in Politicians and Satisfaction with Government – A Reciprocal Causation Approach for European Countries

Trust and satisfaction with the government are the most important indicators of a functioning democratic system. Scholars diverge in their opinions of whether satisfaction causes trust or vice versa or whether both variables reinforce each other simultaneously. This study applies an instrumental variable approach to shed light on this discussion. We employ a sample of 7166 individuals in 3 European countries (i.e., Germany, France, and Great Britain) obtained from the European Social Survey to test this reciprocal relationship. By comparing these three countries with fundamentally different political systems, we investigate the contingency of the reciprocal effect with regard to the political context. The results confirm the reciprocal relationship but reveal differences between the three investigated countries.     

Policy success for whom? A framework for analysis

This article develops a heuristic framework to help analysts navigate an important but under-researched issue: ‘policy success for whom?’ It identifies different forms of policy success across the policy making, program, political and temporal realms, to assess how a specific policy can differentially benefit a variety of stakeholders, including governments, lobbyists, not-for-profits, community groups and individuals. The article identifies a three-step process to aid researchers in examining any policy initiative in order to understand the forms and extent of success experienced by any actor/stakeholder. Central to these steps is the examination of plausible assessments and counter assessments to help interrogate issues of ‘success for whom.’ The article demonstrates a practical application of the framework to a case study focused on the Fixing Houses for Better Health (FHBH) program in Australia—a time-limited Commonwealth government-funded program aimed at improving Indigenous health outcomes by fixing housing.

     

Systems Theory and Complexity: A Potential Tool for Radical Analysis or the Emerging Social Paradigm for the Internationalised Market Economy?

The aim of this paper is to critically assess the claims of systems theory and complexity in the analysis of social change and particularly to examine the view that—if certain conditions are met—both could potentially be useful tools for radical analysis. The conclusion drawn from this analysis is that, although systems theory and complexity are useful tools in the natural sciences in which they offer many useful insights, they are much less useful in social sciences and indeed are incompatible, both from the epistemological point of view and that of their content, with a radical analysis aiming at systemic change towards an inclusive democracy.     

A Social Democratic Future? Political and Institutional Hurdles in Scotland

The Nordic model has long been admired in Scotland, and has featured prominently in aspects of the Scottish independence referendum debate. This article explores the difficulties in instituting a similar system here, identifying two significant barriers: the institutional setting (the powers available to Scottish politicians) and the partisan nature of competition between the two parties that might be able to deliver upon such a commitment. It concludes that the prospects of moving towards a Nordic‐style social investment model are slight, given the political, institutional and attitudinal barriers in place.     

Budgeting for Social Security Or: When Are Savings Really Savings?

Policy and budgetary debate about Social Security is greatly affected by understandings of how the program is financed and, therefore, what steps would make it more affordable in the future. Unfortunately, both the standard justifications for and criticisms of buildups in the Social Security trust funds do not reflect the extent to which such buildups in fact would help finance future program costs. This article argues for a different standard, based explicitly on the fiscal capacity of the federal government and the effect of the government's obligations to pay interest on that capacity. I explain how both this definition of the role of the trust funds, and a broader understanding of fiscal capacity, would affect analysis of Social Security's condition and of possible reforms.     

Welfare-Consequentialism: A Vaccine for Populism?

This article is about two ideologies. Welfare-consequentialism holds that government should adopt the policies that can rationally be expected to maximise aggregate welfare. Populism holds that society is divided into a pure people and a corrupt elite, and asserts that public policy should express the general will of the people. The responses of world governments to the coronavirus pandemic have clearly illustrated the contrast between these ideologies, and the danger that populist government poses to human wellbeing. The article argues that welfare-consequentialism offers a vaccine for populism. First, it rebuts populism’s claims about who government is for and what it should do. Second, the pessimism and distrust that make people crave populism can be satiated by successful welfare-consequentialist government. Finally, welfare-consequentialism’s sunny narrative of progress can be just as compelling to people as populism’s dark story has proven to be.