BOFIT seminar

ICSID deputy director Ekaterina Borisova took part in the seminar of the Bank of Finland that was held in Helsinki on May 15, 2018.

She presented her paper «Generalized Trust and Preferences for Redistribution: Moderating Role of the Institutions» (co-authored by Denis Ivanov and Koen Schoors).

They study how institutional quality moderates the relationship between generalized trust and preferences for redistribution. It has been well established in the literature that generalized trust is conductive to greater support for redistribution reducing expectations of cheating among others. The authors decompose this effect further, first, by studying interaction between individual trust and institutional environment, and, second, by breaking the redistribution preferences down into several target groups such as the poor, the unemployed, the old, the disabled, veterans, and families with little children. Their hypothesis is that trusting individuals are more likely to support redistribution in favor of groups suspicious of cheating (like the poor and the unemployed) only if they live in better institutional environment in which welfare fraud is punished. They test this hypothesis with the Life in Transition II survey, containing data from 38,000 thousand respondents from 35 transition and developed countries. The researchers show that individual trust raises the chances of selecting the poor and the unemployed as the groups deserving support from the government when country-level control of corruption, rule of law and government effectiveness are better. This relationship has not been observed for groups conventionally thought as unambiguously deserving and with simple eligibility criteria, i.e. for the old, the disabled, and families with children. Additionally they find that trust under good institutions is associated with picking all the groups as deserving support.