Inflation, unemployment, and institutional trust: The global evidence

Olga Popova (), Milena Nikolova (), Sarah Grace See () and Vladimir Otrachshenko ()
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Olga Popova: Leibniz Institute for East and Southeast European Studies
Milena Nikolova: University of Groningen
Sarah Grace See: University of Groningen
Vladimir Otrachshenko: National Bank of Slovakia

No WP 6/2025, Working and Discussion Papers from Research Department, National Bank of Slovakia

Abstract: How do macroeconomic conditions shape people’s trust in political institutions? This paper addresses this question by analyzing the association between inflation, unemployment, and political trust using repeated cross-sectional data from over two million individuals across 148 countries between 2006 and 2023. We find that high unemployment is strongly and consistently linked to lower confidence in national governments and reduced approval of national leaders. In contrast, the influence of inflation is substantially smaller—typically four to eight times weaker—and less robust across specifications. Perceptions of national economic performance, personal financial insecurity, and corruption appear to be key channels underlying these relationships. While inflation is linked to lower political trust mostly in upper-middle- and high-income countries, the negative association between unemployment and trust is widespread across all income levels. These findings suggest that unemployment remains a global and salient challenge that governments should prioritize.

JEL-codes: E31 H11 I31 J60 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025-06
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Persistent link: https://EconPapers.repec.org/RePEc:svk:wpaper:1121

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