Henrik Jordahl

Free to Trust: Economic Freedom and Social Capital

We present new evidence on how generalized trust is formed. Unlike previous studies, we look at the explanatory power of economic institutions, we use newer data, we incorporate more countries, and we use instrumental variables in an attempt to handle the causality problem. A central result is that legal structure and security of property rights (area 2 of the Economic Freedom Index) increase trust. The idea is that a market economy, building on voluntary transactions and interactions with both friends and strangers within the predictability provided by the rule of law, entails both incentives and mechanisms for trust to emerge between people.

Inequality and Trust

This paper reviews the literature on economic inequality and trust. Cross-country studies, within-country studies, and experiments all suggest that economic inequality exerts a negative influence on trust. Four mechanisms are proposed to explain the negative relationship: social ties (or networks), inference on social relationships (to see inequality as a signal of untrustworthy behavior), conflicts over resources, and opportunity cost of time. Social ties receive the strongest empirical support, but there is also some evidence in favor of inference on social relationships. Conflicts over resources and opportunity cost of time are contradicted by important pieces of evidence.

Selfish and Prospective: Theory and Evidence of Pocketbook Voting

We present and test a theory of prospective and retrospective pocketbook voting. Focusing on two large reforms in Sweden, we establish a causal chain from policies to sizeable individual gains and losses and then to voting. The Social Democrats proposed budget cuts affecting parents with young children before the 1994 election, but made generous promises to the same group before the 1998 election. Since parents with older children were largely unaffected we use a difference-in-differences strategy for identification. We find clear evidence of prospective pocketbook voting. Voters respond to campaign promises but not to the later implementation of the reforms.

Inequality and Trust: Some Inequalities are More Harmful than Others

We present new evidence on the influence of income inequality on generalized trust. Using individual panel data from Swedish counties together with an instrumental variable strategy we find that differences in disposable income, and especially differences among people in the bottom half of the income distribution, are associated with lower trust. The relationship between income inequality and trust is particularly strong for people with a strong aversion against income differentials. We also find that the proportion of people born in a foreign country is negatively associated with trust.

Merciful yet effective elderly care performance management practices

Purpose – The study aims to compare management practices in private and publicly owned elderly care homes. The demands for cost-effective care combined with emphasis on client experience highlights ...

Comment on education returns of wage earners and self-employed workers

In a recent paper, Garcia-Mainar and Montuenga-Gomez (2005) apply the generalized IV model of Hausman and Taylor to estimate education returns of wage earners and the self-employed in Portugal and in Spain. Our examination reveals several problems which relate to the validity and documentation of the instrumental variables, as well as the robustness of the results.