Public  Policy  and  Trust    

Yann  Algan        Sciences  Po      OECD    October  14th    

Introduc>on  •  Large  evidence  of  a  rela>onship  between  

–  Ins>tu>ons  and  trust:  rule  of  law,  transparency  ….  –  Inequality,  segmenta>on  …and  trust  See  survey  Algan  and  Cahuc,  Handbook  of  Economic  Growth,  2013    

•  How  can  we  iden>fy  the  impact  of  policy  on  trust  ?    –  Regula>on  and  Distrust….  –  School  and  Social  Capital      

I  -­‐Regula>on  and  Distrust  Distrust and regulation of product market

D Z AA R G

A U S

A U T B G DB E L

B R A

B G R

C A N

C H L

C H NH R V

C Z E

D N K

E G Y

F IN

F R AD E U

G R C

H U N

IN DID N

IR L

IT A

JP N

J O R

K O R

L V A

L T UM E X

M A R

N L D

N G A

N O R

P A KP E R

P H L

P O LP R T

R O M

R U S

S G P

S V KS V NZ A F

E S P

S W E

C H E

T Z AT U R

U G A

U K R

G B RU S A

V E N

V N M

Z W E

.51

1.5

22.

53

Reg

ulat

ion

of e

ntry

.2 .4 .6 .8 1D is t ru s t

R ²= 0 .3 2

9

Source:  Aghion,  Algan,  Cahuc,  Shleifer:  Regula>on  and  Distrust  QJE  2010  

Distrust and regulation of labor market

D Z A

A R G

A U S

A U TB G D

B E L

B R A

B G R

C A N

C H LC H N

H R V

C Z E

D N K

E G Y

F IN

F R A

D E U

G R C

H U N

IN DID N

IR L

IT A

JP N

J O R

K O R

LV ALT UM E X

M A R

N LD

N G A

N O RP A K

P E R

PH LP O L

P R T

R O M

R U S

S G P

S V K

S V N

Z A F

E S P

SW E

C H E

T Z A

T U R

U G A

U K R

G B R

U S A

V E N

V N M Z W E

020

4060

80R

igid

ity o

f Em

ploy

men

t Ind

ex

.2 .4 .6 .8 1D istrus t

R ²= 0 .1 1

10

Distrust, Civicness and Flexisecurity

Aus

Aut

Bg

Cd

Czr

Dk

FraGer

Gre

Hg

Ire

ItaJp

Mx

Nth

Nw

Pol

PtSp

Swd

Switz

UkUsa

0.2

.4.6

.8Ex

pend

iture

per

une

mpl

oyed

-.6 -.4 -.2 0Civic attitudes: marginal country effect

WVS and OECD databases 1980-2000

R²=0.36

12

Demand  for  regula>on  Distrust and Political support for Regulation: Micro evidence

Distrust

others

Distrust legal

system

Distrust civil

servants

Distrust

companies

(1) Competition is harmful.027***

(.010)

.025***

(.007)

.013**

(.006)

.139**

(.006)

N 114722 93406 111113 111113

(2) Government should

control firms.097***

(.014)

.022*

(.013)

.020*

(.011)

.023***

(.019)

26978 26919 26594 13318

(3) Government should

take more responsibility

.039***

(.006)

.018**

(.006)

.015**

(.006)

.088**

(.006)

N 129393 123798 123798 120807

(3) In democracies the economic

system runs badly

.134***

(.009)

.081***

(.010)

.082***

(.008)

.053***

(.009)

N 76061 47542 74288 65011

Source: WVS - Controls: country fixed e�ects, gender, age, education, income, political a!liation

Robust standard error with clustering at the country level. ***:1%, **: 5%, *: 10.

19

The  Side  effects  of  Deregula>on  in  Low  Social  capital  environment:  ex  of  Transi>on  Economies  

Changes in social capital between 1990 and 2000: WVS

-0,06

-0,04

-0,02

0

0,02

0,04

0,06

0,08

0,1

0,12

0,14

Distrust in others Distrust in civil servants Distrust in Business

Change in OECD countriesChange in Transition economies

29

Change in corruption: WVS 1990 and 2000

-0,06

-0,04

-0,02

0

0,02

0,04

0,06

0,08

0,1

Justifiable to accept bribes Justifiable to cheat on taxes

Change in OECD countriesChange in Transition economies

30

Change in demand for regulation: WVS 1990 and 2000

0

0,2

0,4

0,6

0,8

1

1,2

Competition is harmful Government should run business

Change in OECD countriesChange in Transition economies

31

Changes in civic education between 1990 and 2000

-0,08

-0,06

-0,04

-0,02

0

0,02

0,04

0,06

Education Respect and Tolerance Education Unselfishness

Change in OECD countriesChange in Transition economies

35

State regulation and civil society: how to build a virtuous circle

Source,  Aghion,  Algan  and  Cahuc,  JEEA  2011  

•  Trust  and  Horizontal  Organiza>on          Bloom  and  Van  Reenen  (2011)  &    Algan,  Cahuc  et  Shleifer  (2013):  4,000  firms    

14  

General  Index  of  Decentraliza>on  of  decisions  between  Central Head Quarter (CHQ) and plants:    «  How  are  decisions  taken  on  new  product  introduc>ons?    At  the  plant  ?  CHQ?  Both  ?»  «  How  much  of  sales  and  marke>ng  is  carried  out  at  the  plant  level  ?  »…  

Cha`er  

Lessons  from    Private  Sector  

Bloom  and  Van  Reenen  (2013):  Rela>onship  between  decentraliza>on,  produc>vity  and  trust  

15  

Cha`er  

Argentina

AustraliaAustriaBelgium

BangladesBulgaria

Brazil

Botswana

CanadaSwitzerland

ChileChina

Germany

Denmark

Algeria

Egypt

Spain

Estonia

Finland

France

UK

Greece

Hungary

IndonesiaIndia

Ireland

Israel

Italy

Jordan

Japan

KoreaLesotho

Luxembourg

Morocco

Mexico

Mali

Malawi

Nigeria

NetherlandsNorway

Pakistan

Peru

Philippines

Poland

Puerto Rico

Portugal

Romania

Singapore

Sweden

Turkey

Tanzania

UgandaUkraine

USA

Venezuela

Vietnam

South Africa

Zambia

Zimbabwe

34

56

Dece

ntra

lizat

ion o

f dec

ision

s with

in fir

ms

0 .25 .5 .75Generalized Trust, country average

R-sq=0.37

!

Decentraliza>on  and  Firm  Size  

16  

Cha`er  

II-­‐  Educa>on  and  Trust  

 Show  the  rela>onship  between  teaching  prac>ces  and  social  capital,  across  countries,  schools  and  within  classrooms    

                   

       

       Ver%cal  versus  Horizontal  Teaching  Methods  

   Varia>on  in  Teaching  prac>ces  

   Country  level  (CES)  

Average  answers  for  “Lecture”  and  “Groups”    

AUS

BEL

BGR

CHE

CYP

CZE

DEU

DNK

EST FIN

GBR

GRC

HUN

ITA

LTU

LVANORPRT

ROM

RUS

SVK SVN

SWE

USA

1.52

2.53

3.5Te

ache

r lectu

res - C

ES

2 2.2 2.4 2.6 2.8 3Students works in groups - CES

!

   Varia>on  in  Teaching  prac>ces  

   Country  level  (TIMSS)  

AUS

AUTBELBGR

CAN

CHE

CZE DEU

DNK

GBRESP

FIN

FRAGRC

HKG

HUNIRL

ISL

ISR

ITA

JPN

KOR

LTU

LVA

NLD

NOR

PRT

ROMRUS

SGPSVK

SVN

SWE

TUR

USA

22.

53

3.5

Take

not

es fr

om th

e bo

ard

- TIM

SS

1 1.5 2 2.5Students works in groups - TIMSS

!

AUS

AUT BELBUL

CDCHE

CZR

DEU

DNK

SP

FIN

FRA

UK

GRCHG

IDN

IREISL

ISR

ITA

JPN

KOR

LTU

LVA

NLD

NW

PRT

ROM

RUS

SGP

SVK SVN

SWD

TUR

USA0

.2.4

.6G

ener

aliz

ed T

rust

0 .5 1 1.5 2Gap between Vertical and Horizontal Teaching

R=0.31

•  “  Coopera>on  among  students”  -­‐  Increase  by  1  point  in  “Students  work  in  group”:    

 2.1  %  of  the  standard  devia>on  in  the  index  “Coopera>on  among  students”  -­‐  Increase  by  1  point  in  “Teacher  lectures”:  2.2%  of  the  standard  devia>on      •  “Coopera>on  between  students  and  teachers”  -­‐    Increase  by  1  point  in  “Students  work  in  group”:  3.6  %  of  the  standard  devia>on  in  the  index  “Coopera>on  between  students  and  teachers”  -­‐    Increase  by  1  point  in  “Teacher  lectures”:  1.6%  of  the  standard  devia>on      

       Across  Schools  varia>on  

Within  school  varia>on