The relationship between institutional quality, trust and private savings

François Facchini (), Sophie Massin and Kevin Brookes ()
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Kevin Brookes: PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble-UGA - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: This paper draws on macroeconomics, the economics of institutions and the economics of trust to explain private savings at the national level for 33 OECD (mostly European) countries from 2002 to 2012. More specifically, it raises two questions: (i) is it the quality of institutions or trust in institutions that drives private savings? (ii) if trust matters, what is the appropriate institutional level at which it operates? To answer these questions, we add to the usual explanatory variables of private savings three measures of institutional quality and six measures of institutional trust, distributed between the following institutional levels, presented in assumed hierarchical order: political, legal, financial and social. We find that trust in political institutions is the most significant driver of private savings. This contributes to the literature underlining the importance of subjectivity in social and economic phenomena and suggests, for private bank savings in countries having highly regulated banking systems, the existence of a hierarchy of trust in which trust in the highest-ranking institutions (political – and to a lesser extent legal – institutions) acts as a substitute for trust in every lower-ranking institution (financial institutions and social trust).

Keywords: belief; institutional quality; social trust; private saving; subjectivity; institutional trust; property right (search for similar items in EconPapers)
Date: 2024-01-08
Note: View the original document on HAL open archive server: https://hal.science/hal-04379761v1
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Published in Journal of Institutional Economics, 2024, 20 (e8), pp.1-28. ⟨10.1017/S1744137423000346⟩

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Working Paper: The relationship between institutional quality, trust and private savings (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-04379761

DOI: 10.1017/S1744137423000346

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