Tuesday, April 26, 2011

Trust and the business cycle

Public distrust in institutions (government, business justice and media) seems to be at an all time low in the United States, especially for banks. While conspiracy theorists have always been poplar in the US, they seem to have a field day now. It this just an impression, or it there some truth to it?

Betsey Stevenson and Justin Wolfers run a very simple exercise: they regress opinion poll results against the unemployment rate and a time trend. Except for the media, it appears that such an economic indicators explains very well confidence in institutions, both in the US and in Europe. That is not too surprising, people are quick to blame someone for a recession.

Unfortunately, the paper does not report the results for the time trends. The figures seems to indicate that confidence has a downward trend, and it would have been interesting to see whether this trend is statistically and economically significant.

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