 Financial shocks and the erosion of interpersonal trust: Evidence from longitudinal dataMichael Jetter and Ingebjørg Kristoffersen Journal of Economic Psychology, 2018, vol. 67, issue C, 162-176 Abstract: This paper evaluates the effect of financial shocks on interpersonal trust levels, exploiting longitudinal survey data from 22,112 Australians. Using within-individual level variation, we find that trust does not change meaningfully following a positive financial shock (e.g., winning the lottery or receiving an inheritance). However, trust falls sharply following a negative financial shock (e.g., bankruptcy). In terms of magnitude, this effect is approximately equivalent to the effect observed after one reports being the victim of physical violence or a property crime, but significantly larger than effects from a range of other individual-level shocks (e.g., being fired or getting divorced). We then explore locus of control, which relates to the extent to which people believe they are in control of their circumstances, as a potential explanation for our core results. Indeed, we find evidence consistent with this hypothesis as locus of control tends to change, and become less internal, following a negative financial shock. In turn, locus of control is closely associated with interpersonal trust levels. Keywords: Financial shocks; Trust levels; Locus of control (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:67:y:2018:i:c:p:162-176 DOI: 10.1016/j.joep.2018.07.001 Access Statistics for this article Journal of Economic Psychology is currently edited by G. Antonides and D. Read More articles in Journal of Economic Psychology from Elsevier |
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