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American Economic Review: Vol. 101 No. 3 (May 2011)

AER Volume. 101, Issue 3 | Previous ArticleNext Article

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Trust in Public Institutions over the Business Cycle

Article Citation

Stevenson, Betsey, and Justin Wolfers. 2011. "Trust in Public Institutions over the Business Cycle." American Economic Review, 101(3): 281-87.

DOI: 10.1257/aer.101.3.281

Abstract

We document that trust in public institutions—and particularly trust in banks, business and government—has declined over recent years. US 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 US states yields similar qualitative patterns, but much smaller magnitudes in response to state-specific shocks.

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Authors

Stevenson, Betsey (U PA)
Wolfers, Justin (U PA and CESifo, Munich)

JEL Classifications

E32: Business Fluctuations; Cycles
G20: Financial Institutions and Services: General
H11: Structure, Scope, and Performance of Government
Z13: Economic Sociology; Economic Anthropology; Social and Economic Stratification