A replication of "Inherited Trust and Growth"
Economics Bulletin, 2018, vol. 38, issue 1, 574-582
Algan and Cahuc (AER, 2010) find that inherited trust has a large impact on GDP per capita. I show that their estimates are possibly biased due to a difference between the lag structure of inherited trust and initial income in their econometric specification. The robustness checks in Algan and Cahuc (2010) potentially eliminate this bias, but suffer from data problems and a missing constant. When these problems are solved, the results do not confirm the main findings anymore, which suggests that the endogeneity issue might be serious. I then re-estimate their main specification with a consistent lag structure but fail to find a statistically or economically significant effect of trust on GDP per capita.
Keywords: Economic Growth; Trust; Culture (search for similar items in EconPapers)
JEL-codes: O4 Z1 (search for similar items in EconPapers)
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