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Abstract
Trust is considered a cornerstone in binding the society, the economy and the politics altogether. The rationale of trust takes into account the importance of both individual factors and social and institutional structures. However, since the onset of the crisis, net trust in institutions has generally declined. The literature has shown that economic and other macro-variables matter for trust in institutions along with individual characteristics. However, there is no systematic evidence on the impact of credit ratings and bailouts. Hence by employing a probit model and using the Eurobarometer survey from 2000 to 2014, this study focuses on rating episodes and bailouts while controlling for individual-level influences. Along with socio-demographic factors and economic conditions, rating episodes and bail-out plans are seen to reduce the tendency of people to trust.
Highlights
A growing number of studies cite trust as the main positive component related to many outcomes like democracy, economic development and that of social capital (Putnam, 2000)
The likelihood ratio test is used to calculate the significance of the model, which in all cases is highly significant. Another worth noting issue is that the explanatory power (Wald test for overall significance) is clearly higher for the European Commission, while the worst fit is encountered for the National Government
Our results show that real GDP growth has a positive impact on trust for only the European Commission whereas the unemployment rate influences trust negatively across all facets
Summary
A growing number of studies cite trust as the main positive component related to many outcomes like democracy, economic development and that of social capital (Putnam, 2000). What is the driving force that makes individuals to place their trust in political or financial institutions? Lack of trust in institutions denotes their failure to function according to the official standards, leading to a weak-state society relation (Citrin & Muste, 1999). In this respect, Arnold et al (2012) claim that trust in political institutions is a key element in representative democracies and the association of trust with a set of public and/or financial institutions becomes a vital substance for their stability. There is a stream of literature recognizing the effect of reasonableness in the tendency to trust arguing that trust is rationally grounded, and individuals based on their knowledge and experience form their attitude towards institutions (Evans & Whitefield, 1995; Hudson, 2006; Hardin, 2006, etc.)
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