Generalized Trust, Preferences for Redistribution and Institutions

Ekaterina Borisova (Higher School of Economics )
Denis Ivanov (Higher School of Economics )
Koen Schoors (Ghent University)

Abstract : We study how institutional quality moderates the relationship between generalized trust and preferences for redistribution. It has been well established in the literature that generalized trust is conducive to greater support for redistribution because it reduces expectations of cheating and free-riding among others. Following Algan et al. (2016), we hypothesize that the effect of trust on preferences for redistribution is conditional on the quality of the institutional environment. Trusting individuals, that is, are hypothesized to be more supportive of redistribution in favor of target groups with a high propensity of free-riding (like the poor and the unemployed) if the institutional environment is more likely to detect and penalize free-riders. We test this hypothesis with data from the Life in Transition II survey that contains 38,000 respondents from 35 transition and developed countries. We find that the effect of individual trust on supporting redistribution in favor of the poor and the unemployed depends indeed on the quality of the formal institutions, like the country-level control of corruption and the rule of law. Trust and formal institutions are therefore complements with respect to their effect on preferences for redistribution. This relationship is not observed for groups conventionally thought of as unambiguously deserving or delineated with free-riding proof eligibility criteria, i.e. for the disabled and families with children. Less trusting people are also willing to contribute as long as they observe a high level of neediness in their direct environment, implying that the observed level of neediness and the level of trust are substitutes in the decision to contribute.

The Economic Impact of Legislative Complexity and Corruption: a Cross-country Analysis

Giuseppe Di Vita (University of Catania)

Abstract : This paper investigates econometrically the relationship between corruption and legislative complexity, and their impact on growth rate, welfare and distribution of the per capita income. We perform econometric analysis using new indicators and index of legislative complexity, built in a way that makes them internationally comparable. In the data set sixty-seven countries are considered, for a period of twenty-one years from 1995 to 2015. To estimate the effects of legislative complexity and political corruption on the growth rate of per capita income, OLS and 2SLS regressions are provided. The results of the econometric analysis support the hypothesis that legislative complexity is a constraint to growth, and that in countries with a long history of liberal democracy legislative complexity determines an income redistribution to the detriment of the poorer social classes.

Judicial Deference and the Efficiency of the Common Law

Mark Kanazawa (Carleton College)

Abstract : Economists and legal scholars have long been interested in the efficiency of common law. A shortcoming of existing studies in this literature is that they ignore the role of judges in reviewing legislative enactments. Judicial review ties the efficiency of common law to the efficiency of the statutes reviewed. If judges defer to inefficient statutes, the common law will then reflect those inefficiencies. To investigate the efficiency of judicial review, the paper examines 496 judicial rulings of occupational licensing statutes in federal, state, and territorial courts during the period 1885 to 1911. Evidence from this analysis suggests that judicial deference has evolved over time, from efficiency-supporting review during the Progressive Era to inefficient deference currently.