Does democracy foster trust?

The level of trust inherent in a society is important for a wide range of microeconomic and macroeconomic outcomes. This paper investigates how individuals' attitudes toward social and institutional trust are shaped by the political regime in which they live. The German reunification is a unique natural experiment that allows us to conduct such a study. Using data from the German General Social Survey (ALLBUS), we obtain several interesting results. We first show that, shortly after reunification, East Germans displayed a significantly less trusting attitude than West Germans. We then show that the experience of democracy by East Germans since reunification did not serve to increase levels of social trust significantly. In fact, we cannot reject the hypothesis that East Germans, after more than a decade of democracy, have the same levels of social distrust as shortly after the collapse of communism. In trying to understand the underlying forces, we show that the persistence of social distrust in the East can be explained by negative economic outcomes that many East Germans experienced in the post-reunification period. Interestingly, and in sharp contrast to social trust, we also find that the levels of institutional trust in the East significantly converge towards those in the West. Journal of Comparative Economics 37 (2) (2009) 251-269.