Saturday, October 2, 2010

Proving Bo Rothstein wrong: Why do Swedes trust more? Culture, not welfare state policy.

Sweden and Scandinavia have some of the highest rates of trust in the world, higher than the United States. Trust is not merely fluff to scoff at. Trust and trustworthiness are both signs of a well functioning society and important lubricants for the economy in their own right. Countries with high levels of trust tend to have higher quality of life.

Swedish political science professor Bo Rothstein is one of the people who has claimed that welfare state policies is the cause for high levels of trust in Sweden and Scandinavia. Since trust is good for the economy and society, this would, if true, indeed be a powerful argument in favor of the welfare state.

Rothstein thus writes:

"it is obvious that the countries that score highest on social trust also rank highest on economic equality, namely the Nordic countries, the Netherlands, and Canada. Secondly, these are countries have put a lot of effort in creating equality of opportunity, not least in regard to their policies for public education, health care, labor market opportunities and (more recently) gender equality."

I am going to show to you with a few data points that Bo Rothstein is most likely wrong in his explanation of the the source of Nordic trust.

This paper by other Swedish researchers provides the values for trust for 63 countries from the world value survey.

Sweden has 27% higher trust than the average for the United States. The average of the Nordic countries (Sweden, Norway, Denmark and Finland) have 21% higher trust than the United States.

So far so good for Rothstein's policy-based theory. Welfare state policies and a kind and forgiving society have made trust levels in Sweden and Scandinavia high, whereas Americans living in a brutal market economy cannot trust each other.

My standard critique of this explanation is that it ignores culture, norms and selection. Culture, broadly defined, is tremendously important, and countries with different cultures are likely to have both different outcomes and different policies, without this being an evidence that one caused the other.

So now let's look at trust levels within the U.S, using the General Social Survey (The General Social Survey has large enough sample size to make measurement of small groups meaningful). Millions of Americans are descendants of Scandinavian immigrants. They have lived in the U.S for generations, and their lives are as much influenced by the American (relatively) small government economic system as other Americans.

The results are striking. Americans of Swedish descent have 33% higher trust than average for the United States. Americans of Nordic descent have 39% higher trust than the average for the United States.

How is this possible if the explanation is:

"policies for public education, health care, labor market opportunities and (more recently) gender equality"?

If we notice that Scandinavians in welfare state Scandinavia and Scandinavians in the free-market U.S share the trait of being more trusting than other groups, the most likely explanation is to be found in cultural differences rather than economic policy.

The treatment effect of those policies is virtually identical for all Americans, regardless if their grandfather was Swedish or not. It's not like Americans from Scandinavia living in the Midwest get to enjoy lots of secret welfare state programs that Italians in New Jersey don't have access too. Same country, more or less the same policies. Yet levels of trust are very different within the U.S depending on your cultural heritage.

Once again not accounting for selection ruins the Social Democratic theory: Which states that develop a welfare state is not random. The high trust states have lower costs of doing so. And once again, I show that demography and culture can be more important explanatory variables than policy differences.

Here is a graph plotting trust in countries, with the trust level of people from that country in the U.S (remember, overwhelmingly these are recent not immigrants, but American born people who originated from these countries generations ago).

Both series normalize the average U.S trust level at 1.

15 comments:

  1. But, how many Scandinavians are recent immigrants to the US? Is the homeland culture still deeply ingrained? Maybe there is a factor besides culture that accounts for the correlation between being Scandinavian and a propensity for trusting.

    I have no data to back this up, I'm just taking guesses, but if it happens to be the case that Scandinavians in America are wealthier than Americans generally, wouldn't that be interesting to this discussion? Maybe wealth (and the kind of life you live as a result) is more relevant than culture.

    It could even be that RELATIVE wealth is the important thing. Maybe that's why the average for Sweden is higher than the US by 27%, while the average for people of Nordic descent in the US is 39% higher. Maybe Swedes at home have high trust because of relative income equality, while Swedes (and other Nordic folk) in the US have much HIGHER trust than the US average because they are not just of average wealth, but ABOVE average!

    I'm not saying I'm right. Just that there are possible alternate explanations.

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  2. Tino - Great post! What I don't understand is why you don't take this more seriously yourself. You could be more careful with the data, control for various factors, and probably still arrive at the same result. Then you would have a nice publication, instead of just a blog post. You deserve more credit than just a few encouraging comments on your blog ...

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  3. Robert:

    They are not recent immigrants, they came largely in the 19th century. But they have apparently kept some of their culture which is what I consider remarkable.

    They do also have higher earnings, I have written about this earlier. But why would higher wealth make you trust more? Italians have high wealth, and do not trust.

    Pontus:

    In my field in the U.S only top publications matter. This would not be a top publication, so why waste my time?

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  4. I hope you have read the study by Robert Östling where they show correlation between an extensive Public Sector and trust.


    For those of you that can read Swedish you can find a blog post by Robert Östling about his new study.

    The post is called:

    "United we stand, divided we fall"

    http://ekonomistas.se/2010/10/04/enade-vi-sta-sondrade-vi-falla/


    Link to study "Political Polarization and the Size of Government"

    http://people.su.se/~rob/papers/Polarization%20APSR%202010.pdf

    ERIK LINDQVIST Stockholm School of Economics and
    Research Institute of Industrial Economics
    ROBERT O¨ STLING Stockholm University

    "In this article, we study the relationship between political polarization and public spending using the
    dispersion of self-reported political preferences as our measure of polarization. Political polarization
    is strongly associated with smaller government in democratic countries, but there is no relationship
    between polarization and the size of government in undemocratic countries. The results are robust to a
    large set of control variables, including gross domestic product per capita and income inequality."

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  5. Old Whig:

    Thanks. Although there is nothing in östlings post that contradicts my hypothesis. As you write it is a question of policy relevance where trust comes from. Will the smart people that have invested intellectual capital in trust-theory and homogeneity theory come to the logical policy conclusion when the source of trust (from culture, with feed-back effect of course, not policy)?

    The QJE I do not believe in. State spending on social policy is higher as a share of state income in more diverse states. The direct effect of minorities demanding and needing more welfare empirically dominates the indirect effect of majority political opposition to welfare in more diverse states.

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  6. Why couldn't it be a top publication, when papers like these are recurrently published in AER, QJE etc.?: http://econ.sciences-po.fr/sites/default/files/file/yann%20algan/Inherited%20Trust%20and%20Growth_AER.pdf

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  7. Thanks Pontus for the link, I had not read that.

    Some trust papers get published, most don't. But don't worry, even about trust, I kept the most interesting result I have found to use in a paper.

    The blog is mainly for ideas not good enough to go into papers.

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  8. Most Swedes live in the USA, not in Sweden.

    Because of Swedish & Norwegian immigration, USA states with high levels of Scandinavian ancestry tend to have greater trust and higher levels of taxes and welfare-services. Think of Minnesota.

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  9. Tino - Good to hear. Keep it up, I really like the insights from your blog.

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  10. Tino,

    Regarding wealth and trust, I just wonder whether growing up in relative poverty in a society with a high degree of inequality tends to erode one's ability to trust.

    Growing up either wealthier than or about as wealthy as others in your society means you're not likely to be part of a repressed and marginalized underclass. It means you're more likely to have roughly equal opportunities as others, and to receive roughly equal (and equality tends to equate to fairness) treatment at the hands of the law, of employers, etc.

    All of this could be wrong, of course. I don't have data. But I can't help but wonder how many other factors besides national origin are correlated with trust.

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  11. Someone might want to investigate differences between the Norwegian-Americans of my ancestral area of northern Illinois, who arrived around 1850, and the Norwegian- and Swedish-Americans of Minnesota, who arrived, I think, rather later. The Illinoisans are conservative Republicans; the Minnesotans have a lot of liberal Democrats (or were too liberal to be Democrats, historically!).

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  12. I have worked in Scandinavia as a Psychologist off and on since 1986 and I see these issues in a couple of different ways. 1. The cohesion of Scandinavians comes not from trust but the Jante Law. An overarching archetype that promotes a failure of nerve and fear of differentiation or standing out from the crowd. This leads to a "hatred of the bell curve" that statistically predicts differentiation. Thus, it looks like trust but is in reality anxiety.

    2. Many of the most innovative and creative people from Scandinavia have immigrated to the USA and we have benefited greatly from their ideas. Entrepreneurs are punished by public opinion, tax rates and media attention. Being innovative means going against the Jante Law and is extremely difficult to do. Athletes can do it but business persons must immigrate. But when here in the US they can make money but still come across as humble, friendly, trusting and communal. Rarely do they flaunt their wealth. (Donald Trump is an outlier.) 3. My experience with Swedes is outward trust but inward anger. So, they conform but not from trust but cultural pressure.

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  13. Likely a result of gene-culture coevolution?

    "Since his 1995 book on the subject, researchers have found that oxytocin, a chemical active in the brain, increases the level of trust, at least in psychological experiments. Oxytocin levels are known to be under genetic control in other mammals like voles.

    It is easy to imagine that in societies where trust pays off, generation after generation, the more trusting individuals would have more progeny and the oxytocin-promoting genes would become more common in the population. If conditions should then change, and the society be engulfed by strife and civil warfare for generations, oxytocin levels might fall as the paranoid produced more progeny.

    Napoleon Chagnon for many decades studied the Yanomamo, a warlike people who live in the forests of Brazil and Venezuela. He found that men who had killed in battle had three times as many children as those who had not. Since personality is heritable, this would be a mechanism for Yanomamo nature to evolve and become fiercer than usual."

    http://www.nytimes.com/2006/03/12/weekinreview/12wade.html?pagewanted=all&_r=0

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