Trust in Public Institutions Over the Business Cycle

12 Pages Posted: 21 Mar 2011 Last revised: 26 Feb 2023

See all articles by Betsey Stevenson

Betsey Stevenson

University of Michigan at Ann Arbor

Justin Wolfers

University of Michigan at Ann Arbor - Department of Economics; University of Michigan at Ann Arbor - Gerald R. Ford School of Public Policy; The University of Sydney - Discipline of Economics; Brookings Institution - Economic Studies Program; Peterson Institute for International Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Kiel Institute for the World Economy

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Date Written: March 2011

Abstract

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

Suggested Citation

Stevenson, Betsey and Wolfers, Justin, Trust in Public Institutions Over the Business Cycle (March 2011). NBER Working Paper No. w16891, Available at SSRN: https://ssrn.com/abstract=1789472

Betsey Stevenson (Contact Author)

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Justin Wolfers

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