The effect of trust on economic performance and financial access

Abstract

This paper uses individual-level data from the Gallup World Poll to examine the effect of institutional trust on individual-level outcomes. We make three contributions to the literature. First, the data set allows us to examine whether the relationship varies by the stage of economic development. Second, unlike most studies, we examine the relationship between trust and performance allowing for a non-linear relationship and identify the optimal level of trust. Third, in addition to individual-level income, we examine the effect of individual-level trust on individual-level access to financial services, an important factor in economic development and financial well-being.