Formal Institutions and the Trust Formation Process: A Psychological Approach to Explain the Relationship between Institutions and Interpersonal Trust

Larysa Tamilina and Natalya Tamilina

MPRA Paper from University Library of Munich, Germany

Abstract: While formal institutions are recognized as having an effect on trust formation, no theoretical or empirical models exist to formalize this relationship. This study introduces a new conceptual framework to explain trust building by individuals and the role that formal rules and laws may play in this process. Drawing on a social-cognitive theory of psychology, we present trust as composed of internal, interpersonal, and external components with the latter encompassing formal institutions. We further demonstrate that there are three mechanisms – sanction, legitimacy, and autonomy – through which formal institutions may affect trust levels either directly or indirectly. These propositions are tested empirically based on the European Social Survey data (2004) by using a variety of statistical techniques. Our empirical analysis demonstrates evidence of heterogeneity in institutional effects on trust, suggesting that the autonomy dimension of the institutional framework is particularly important for trust formation processes.

Keywords: interpersonal trust; formal institutions; social-cognitive psychology; heterogeneity; trust formation process (search for similar items in EconPapers)
JEL-codes: K42 Z10 Z13 (search for similar items in EconPapers)
Date: 2013-06-01
New Economics Papers: this item is included in nep-cbe, nep-cse, nep-evo, nep-law and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49812

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