Re-evaluating the individual level causes of trust: a panel data analysis (original) (raw)

Existing empirical research into the causes of interpersonal trust identify social connectedness and significant life-events as important cause of what has been termed the attitudinal dimension of social capital. However, the majority of existing investigations are limited by their reliance on cross-sectional data. In this paper, high-quality repeated measures data are used to examine the effect of a range of explanatory variables on subsequent levels of interpersonal trust over a six year period. A fixed effects specification is used to control for the time-invariant characteristics of individuals that might spuriously link the explanatory variables to subsequent changes in trust. The results of the fixed effects model are contrasted with cross-sectional and random effects specifications, which do not control for unobserved individual heterogeneity. While the cross-sectional and random effects models show substantial effects of associational membership and a range of life events on subsequent levels of trust, the fixed effects specification shows only three significant explanatory variables. The only events found to predict a future increase in trust are obtaining a post-compulsory educational qualification, a decline in subjective health status, and improving one's perception of the financial situation of the household. These results support the conclusion that existing cross-sectional studies of the causes of interpersonal trust are likely to be affected by endogeneity bias.