Explaining the Impact of Formal Institutions on Social Trust: A Psychological Approach

Abstract

By drawing on psychological models of action choice, this study distinguishes between four key factors that determine trust building: (a) knowledge to trust, (b) others-regarding, (c) cognition and (d) contexts. These four factors are combined into a single analytical framework that is used for establishing channels through which the institutional context impacts social trust formation. Our theoretical and empirical evidence suggests that context is the strongest determinant of trust, with its overall effect being, however, modified by the degree to which the individual’s knowledge of trusting, cognition and others-regarding is developed. The Programme for the International Assessment of Adult Competencies (PIAAC) data from the year 2012 are utilized for testing our propositions. JEL: D02, D03, Z10, Z13