Two-Way, One-Way or Dead-End Streets? Financial and Social Causes and Consequences of Generalized Trust

Abstract

Scholars disagree on whether and to what extent adult life experiences can influence generalized trust and vice versa. Going beyond the methodological limitations of former studies, we aimed to answer the question as to what extent reciprocal causal relationships exist between generalized trust and the adult life experiences of financial success and (in)formal social contacts. We used two-wave cross-lagged panel models to identify those reciprocal causal relationships, and fixed-effects models to assess if they might be biased due to unaccounted time-invariant influences. Data from the Dutch NELLS panel study (age range 17–49) show that compelling empirical evidence is found for a reciprocal causal relationship between generalized trust and household income that does not suffer from bias due to unobserved heterogeneity. Furthermore, more trusting individuals experience a stronger decrease in material deprivation, but not vice versa. Trust and (in)formal social contacts are not causally related in any of our models.