Growth Experiences and Trust in Government

This paper investigates whether individuals who have experienced stronger GDP growth over their lifetimes are more likely to trust their national government. The authors — Besley, Dann, and Dray — assemble a newly harmonized global dataset comprising approximately 3.3 million respondents across 166 countries since 1990, drawn from 11 major opinion surveys (Afrobarometer, Americasbarometer, Arabarometer, Asiabarometer, European Social Survey, Gallup World Poll, Integrated Values Survey, Latinobarometer, Life in Transition Survey, South Asia Barometer, and World Justice Project). They supplement this with longer-run U.S. evidence from the American National Election Studies (ANES) going back to 1958, covering respondents born as early as the 1880s, and longitudinal Swiss evidence from the Swiss Household Panel (SHP) which allows individual fixed-effects estimation.

The core methodological contribution is the exploitation of country-cohort variation in lifetime GDP growth experiences. Following Malmendier and Nagel (2011), the authors construct a weighted average of past growth realizations across an individual’s lifetime, with weights decaying linearly over time (lambda = 1), so that more recent growth receives greater weight. The baseline specification includes country fixed effects, cohort-by-subcontinent fixed effects, survey-by-survey-year fixed effects, controls for log GDP per capita at year of birth, and individual characteristics (sex, marital status, education, religious denomination). More demanding specifications add country-by-survey-year and country-by-age fixed effects. For Switzerland, individual fixed effects are included, fully absorbing time-invariant personal characteristics.

The main finding is that a one standard deviation increase in lifetime GDP growth experience — corresponding to approximately 2 percentage points of additional growth — is associated with a 2.1 percentage point increase in the probability of trusting the national government, significant at the 1 percent level. This corresponds to roughly 0.042 standard deviations of the trust outcome and approximately 5 percent of the global mean trust in government. The effect is quantitatively meaningful: it approximates between one-quarter and one-half of the difference in average trust between older and younger cohorts in India and Italy, respectively. For the U.S. ANES sample, a one standard deviation increase in growth experience (about 0.2 percentage points) increases trust in the federal government by 2.4 percentage points, explaining more than two-thirds of the average trust gap between Baby Boomers (born 1946–1964) and Millennials (born 1981–1996).

Several scope conditions and heterogeneity findings sharpen the interpretation. First, the growth-trust link is specific to government institutions: there is no statistically significant effect of growth experience on interpersonal trust or trust in religious organizations, indicating the channel runs through perceptions of state performance rather than generalized social capital. Second, a recency heuristic operates: the linearly decaying weighting function (lambda = 1) outperforms both an unweighted lifetime average (lambda = 0) and a formative-years weighting. Growth experienced during formative years (ages 18–25) or before birth has no detectable effect on trust in government; the pre-birth result serves as a placebo test. Third, the positive growth-trust relationship is stronger in democracies than in autocracies, which the authors interpret as democracies producing citizens more responsive to government performance signals. Fourth, a “trust paradox” emerges: unconditionally, average trust in government is lower in democracies than in autocracies, and longer democratic experience is associated with lower trust, which the authors attribute to democratic institutions generating greater citizen skepticism about government performance. Fifth, core results are robust to controlling for other lifetime politico-economic experiences including inflation, banking and currency crises, epidemics, political unrest, executive turnover, stock market returns, and income inequality. The Swiss evidence further shows that private income growth experience does not drive the result — only aggregate macroeconomic growth does.

Q: What is the paper’s core quantitative finding on the growth-trust relationship? A: Using the global harmonized dataset of 3.3 million respondents across 166 countries, a one standard deviation increase in lifetime GDP growth experience (corresponding to approximately 2 percentage points of additional growth) is associated with a 2.1 percentage point increase in the probability of trusting the national government, significant at the 1 percent level. Using only the Gallup World Poll subsample (roughly half the observations), the estimated effect is somewhat larger at 3.6 percentage points per standard deviation increase. These estimates remain statistically significant under more demanding specifications with country-by-survey-year and country-by-age fixed effects, though the magnitudes decrease as these interacted fixed effects absorb variation in recent growth experiences.

Q: How do the authors measure individual lifetime growth experience? A: The growth experience variable is a weighted average of all past annual GDP per capita growth rates since an individual’s birth, with weights that decay linearly over time (lambda = 1 in the Malmendier-Nagel framework). Under this parameterization, the measure simplifies to how much recent economic performance (in the year prior to the survey) exceeds the long-run mean over the respondent’s lifetime, scaled by the respondent’s midpoint of life. This implies younger individuals are more sensitive to recent growth outcomes because their shorter life histories give recent events relatively greater weight. The authors validate this lambda = 1 choice via a grid search over alternative weighting structures using minimum residual sum of squares as the criterion.

Q: How is reverse causality addressed? A: The empirical strategy identifies the relationship using past, cumulative growth experiences measured prior to the survey, so current trust in government cannot cause past growth. Survey-year fixed effects absorb all aggregate time trends simultaneously affecting trust and growth. The authors also conduct a placebo test showing that GDP growth occurring before an individual’s birth has a precisely estimated null effect on their trust in government, which would not be the case if unobserved societal trends were jointly driving both growth histories and political perceptions.

Q: Does growth experience affect interpersonal trust or trust in non-state institutions? A: No. The estimated coefficient on lifetime growth experience is statistically insignificant at conventional levels when interpersonal trust replaces trust in government as the dependent variable, with narrow confidence intervals indicating a precisely estimated null. Similarly, growth experience has no systematic effect on trust in religious organizations such as churches or mosques. The authors interpret these null results as evidence against the alternative explanation that broad modernizing social changes are jointly driving both growth experiences and political trust.

Q: What do the U.S. ANES results add? A: The ANES data, which extends back to 1958 and captures cohorts born as early as the 1880s, provide a within-country test controlling for state fixed effects, generation dummies, and rich individual characteristics including partisan affiliation and partisan strength. A one standard deviation increase in U.S. growth experience (approximately 0.2 percentage points) raises trust in the federal government by 2.4 percentage points, significant at the 1 percent level. This estimate is quantitatively large enough to explain more than two-thirds of the average trust gap between Baby Boomers and Millennials. Results are robust to adding state-by-survey-year fixed effects and birth-state-by-generation fixed effects, and hold for a broader “trust in government index” covering beliefs about waste, corruption, and responsiveness of the federal government.

Q: What do the Swiss Household Panel results contribute? A: The SHP allows individual fixed-effects estimation, exploiting within-person changes in growth experience and trust over time from 1999 onward, which absorbs all time-invariant individual characteristics that could confound the global and U.S. cross-cohort results. The growth experience coefficient remains positive and significant, with a one standard deviation increase yielding a 1.9 percentage point increase in trust in the Swiss federal government (significant at the 1 percent level). The Swiss data also uniquely allow the authors to test whether personal income growth experience drives the result; they find no significant effect of private income growth experience on trust in government, only aggregate macroeconomic growth matters.

Q: Does the recency heuristic hold — does growth in formative years matter? A: No. The authors find no detectable effect of growth experienced specifically during formative years (ages 18–25) on trust in government. Additionally, in a grid-search exercise assessing model fit across different lambda values, the linearly decaying weighting scheme (lambda = 1, giving more weight to recent growth) outperforms both equal-weighted lifetime averages (lambda = 0) and weighting schemes that emphasize earlier life experiences (lambda less than 0). The pre-birth placebo result (null effect) and the absence of a formative-years effect together indicate that the operative mechanism is about evaluating current government performance based on recent macroeconomic experience, not the imprinting of long-lasting political dispositions during youth.

Q: What is the “trust paradox” and how is it documented? A: The trust paradox refers to the empirical finding that average trust in government is lower in democracies than in autocracies at the cross-country level, and that longer experience with democratic institutions within countries is associated with lower levels of trust in government in the micro data. This is counterintuitive given the standard view that good institutions should foster confidence in government. The authors suggest the paradox likely reflects democracies cultivating greater citizen skepticism and more critical judgment of government performance, rather than indicating that democratic governance actually performs worse. Importantly, the positive effect of growth experience on trust remains present in democracies, and the growth-trust relationship is actually stronger in democratic regimes, consistent with citizens in democracies being more responsive to government performance signals.

Q: How is the growth-trust finding related to corruption perceptions and living standards? A: Using the Gallup World Poll, the authors find that stronger lifetime growth experience is associated with lower perceived corruption in government, greater satisfaction with personal living standards, and higher likelihood of feeling one lives comfortably on one’s present income. These results are consistent with citizens attributing economic success to government competence and integrity, and with growth translating into perceptions of improved personal circumstances through both direct income effects and indirect public goods provision.

Q: Are the results robust to controlling for other lifetime politico-economic experiences? A: Yes. When the authors include lifetime experience measures for political unrest, executive turnover, epidemic exposure, banking crises, currency crises, and inflation (both levels and volatility) simultaneously in equation (3), the growth experience coefficient remains consistently positive, stable, and significant across all specifications. Among the other experience variables, only lifetime unrest and epidemic exposure are independently negative and statistically significant at conventional levels. F-tests reject the null hypothesis that the crisis and growth experience coefficients are equal in magnitude. The U.S. results are also robust to adding lifetime experiences with S&P 500 returns, unemployment, and top-income-share inequality measures.

Q: What are the policy implications of the findings? A: The authors note that sustained economic growth may itself be a mechanism for building political trust, with positive downstream effects for policy compliance — a connection they document has been relevant during the COVID-19 pandemic (where higher-trust societies showed lower mobility during lockdowns and higher vaccine acceptance). The growth-trust channel could have implications for increasing compliance across a range of policy domains including climate action and tax morale. Governments that deliver sustained economic growth can expect citizens to update their trust upward, particularly in democracies where citizens are more performance-responsive, while governments that preside over stagnation or contraction face predictable erosion of political legitimacy across cohorts.

Growth experience: A weighted average of all past annual GDP per capita growth realizations since an individual’s birth, with weights that decay linearly over time following Malmendier and Nagel (2011), so that more recent growth receives greater weight. Under the paper’s preferred parameterization (lambda = 1), the measure equals how much last year’s GDP per capita exceeds the respondent’s lifetime mean, scaled by the respondent’s midpoint of life.

Trust in government: A binary dummy variable equal to one if a survey respondent expresses “a great deal” or “quite a lot” of trust or confidence in the national government, constructed from harmonized responses across 11 major opinion surveys. The paper treats this as reflecting respondents’ perceptions of government performance rather than a deep interpersonal trust relationship.

Trust paradox: The empirical regularity documented in the paper whereby average trust in government is unconditionally lower in democracies than in autocracies at the cross-country level, and whereby longer democratic experience within countries is associated with lower individual trust in government. The authors attribute this to democratic institutions generating more critical citizen judgment of government performance.

Recency heuristic: The finding that more recent growth experiences carry greater weight in forming trust in government, as captured by the linear decay weighting scheme (lambda = 1) outperforming equal-weighted or early-life-weighted alternatives. Growth before birth and growth during formative years (ages 18–25) have no detectable effect, while recent macroeconomic performance is the operative signal.

Cohort-level variation: The within-country differences in lifetime growth experiences across birth cohorts that form the paper’s primary identification strategy. Because different cohorts in the same country have lived through different sequences of growth episodes, differences in trust across cohorts within a country can be attributed to differential growth exposure rather than time-invariant country characteristics.

Formative years effect: The hypothesis, tested and rejected in the paper, that economic experiences during ages 18–25 have a lasting imprint on political attitudes analogous to formative-years effects found in other political behavior literatures. The paper finds no statistically significant association between growth experienced during these years and trust in government.

Source text origin: In the pipeline context relevant to this paper’s acquisition, this refers to whether a summary was generated from full working paper text (“pdf” or “oa-html”) versus abstract only (which is hard-blocked). The working paper was obtained from LSE Research Online (eprint 129614), classified as published version under CC BY 4.0.