Political Trust and Economic Development in European Regions

Jonathan Muringani, Rune Fitjar and Rodríguez-Pose, Andrés

No 19622, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper examines the complex relationship between political and social trust, government quality, and economic development across 208 regions in the European Union (EU). We use a pooled data generalized structural equation model (GSEM) to show that political trust serves as a fundamental driver of regional economic development in the EU. Political trust is, in turn, influenced by both social trust and government quality. Social trust and government quality have quadratic effects on political trust, showing diminishing returns, while the effect of political trust on economic development is linear. Political trust mediates the relationship between social trust and economic development entirely, while government quality retains a direct relationship with economic development. These findings underscore the fundamental role that political trust plays as a mechanism through which both formal and informal institutions shape regional development.

JEL-codes: D73 H11 O43 R11 (search for similar items in EconPapers)
Date: 2024-10
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