DP8308 Trust in Public Institutions over the Business Cycle

Author(s): Betsey Stevenson, Justin Wolfers
Publication Date: April 2011
Keyword(s): banks, big business, confidence, congress, courts, institutions, media, survey data, Trust
JEL(s): D72, E32, E65, K0, P52, Z13
Programme Areas: Labour Economics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8308

We document that trust in public institutions--and particularly trust in banks, business and government--has declined over recent years. U.S. time series evidence suggests that this partly reflects the pro-cyclical nature of trust in institutions. Cross-country comparisons reveal a clear legacy of the Great Recession, and those countries whose unemployment grew the most suffered the biggest loss in confidence in institutions, particularly in trust in government and the financial sector. Finally, analysis of several repeated cross-sections of confidence within U.S. states yields similar qualitative patterns, but much smaller magnitudes in response to state-specific shocks.