Trust, perceptions of corruption, and demand for regulation: Evidence from post-socialist countries

Valentina Dimitrova-Grajzl, Peter Grajzl and A. Joseph Guse

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2012, vol. 41, issue 3, 292-303

Abstract: While the tradeoff between market failure and government failure has been explored both theoretically and in practical policy design, the question of whether this trade-off appears in the calculus of citizens’ demands for government regulation remains underexplored. We first clarify the channels through which concerns for market failure, as proxied by trust in market participants, and concerns for government failure, as proxied by perceptions of corruption, jointly affect individuals’ demand for government regulation. We then investigate these effects empirically, using data from post-socialist countries. Our analysis confirms the previously established result that trust has a negative effect on demand for regulation. Perceived corruption, however, affects demand for regulation primarily via a negative interaction effect with trust. Our findings suggest that, in post-socialist countries, both concerns for market failure and concerns for government failure are indeed in citizens’ minds and that concerns about the anticipated ‘grabbing-hand’ effect from government involvement are particularly salient.

Keywords: Demand for regulation; Trust; Perceptions of corruption; Post-socialist countries (search for similar items in EconPapers)
JEL-codes: K20 L51 P30 Z13 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:41:y:2012:i:3:p:292-303

DOI: 10.1016/j.socec.2012.01.005

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