The Socio-Economic Determinants of Interpersonal Trust Levels

Abstract

We examine the impact of social and macroeconomic determinant such as economic growth, human capital, and population on interpersonal trust levels in the context of contributing to the area of behavioral economics. Two main policy variables included in the model are political stability and rule of law and order which may have promising contributions to raising interpersonal trust levels. We use panel data of five waves from World Value Survey data for fourteen countries during the 1999-2020 period. The findings of the study suggest that rule of law and order and political stability, are highly significant contributors to interpersonal trust. Our findings show an important channel, which is rarely explored before; that is human capital leading to interpersonal trust as it is associated with a higher level of education and health. Moreover, another important contribution of our study is the finding of an indirect role of economic growth on interpersonal trust levels. The inherent rationales for such are further explored in detail in our study.