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Journal of Economics and Finance

Erschienen in:

10.08.2018

The growth of government, trust in government, and evidence on their coevolution

verfasst von: Steven Gordon, John Garen, J. R. Clark

Erschienen in: Journal of Economics and Finance | Ausgabe 3/2019

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Abstract

The coevolution of trust in government alongside the growth of government is an aspect of research on the latter topic that has not been explored. We consider this coevolution in the context of a political economy model and a public interest view of government growth and incorporate the role of trust in government. The negative association of the growth in government with trust in government is consistent with a political economy model of government growth, rent seeking/lobbying, trust, and productivity. Though such a model is broadly consistent with the historical data since the late 1950s, we present a more econometrically sophisticated examination of the data. In particular, we recognize the difficulties of statistical inference with non-stationary data and take the appropriate steps to deal with it. There is evidence that two aspects of government size – transfer payments and regulatory activity – align with the political economy model. Specifically, we find cointegration indicating the following: a negative association between trust and lobbying activity, a negative relationship between trust and each of these two measures of government, and a positive association of trust and productivity. However, other measures of government size do not produce as robust of findings. Also, we do not find evidence of positive associations of trust and government size nor of trust and lobbying, as might be expected from a public interest view of government.

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As examples, Nye Jr. et al. (1997), Hunter and Bowman (1996), Warren (1999), Dalton (2004), Blind (2006), Hetherington (2005), Pharr (2000), and Lewis (2010).

For more complete discussions of the literature and a full set of references, we refer the reader to Holsey and Borcherding (1997) and Borcherding and Lee (2004), as well as to Kau and Rubin (2002).

Spann (1977) and Ferris and West (1999) find that the price of government services has risen over time and many studies find a low price elasticity for government services; e.g., Perkins (1977) and Gramlich (1985).

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See their paper for a thorough discussion of the literature on the effect of ideology on voting.

Many more details are in Pew Research Center ( 2010). For other discussions of trends in measures of trust in government for the U.S., see Nye Jr. et al. (1997) and Hunter and Bowman (1996).

See the work cited in footote 1.

The appendix reviews the essential structure of the Garen and Clark (2015) synthesis. Note that they draw upon large and diverse sets of literature on trust, reciprocity, and cooperation; on social capital and productivity; and on rent seeking and political economy/public choice and each is discussed in their paper.

A succinct summary is Fukuyama (2000).

See Knack and Keefer (1997) as an example.

Fehr and Gachter (2000) provide a succinct summary of these experimental results. See also Henrich et al. (2001) and Hayashi et al. (1999).

See, for example, Blendon et al. (1997), Pharr (2000), and Alesina and Warcziarg (2000).

These data are used in Pew Research Center for the People and the Press (2010) and are summarized at http://www.people-press.org/2014/11/13/public-trust-in-government/. For years that more than one survey was taken, we use the average percent. In some years, no survey of this nature was done and in these cases, we enter interpolated data. In the earlier years, such surveys are available roughly every other year. Since the mid-1970s there is a survey almost every year.

However, our data collection shows that the correlation between pages in the Federal Register and the Code of Federal Regulations is very high at 0.89.

The first six titles of the CFR are excluded because they focus on the internal workings of the federal government.

The years 1960, 1961, and 1963 were missing and were imputed based on historical trends.

We also experiment with using political organizations employment as a percentage of total employment and the findings were very similar.

We do not use the VAR approach to examine Granger causality among the variables due to the likely bias of VAR coefficients with our sample size of 54 observations. Abadir et al. (1999) Monte Carlo evidence shows that with 50 observations and 4 variables, the VAR coefficient bias is substantial (14%). This, in combination with the long, 54 year time period being suited to cointegration as noted above, dissuades us from using VAR.

Note that estimation of the error correction coefficients, while done simultaneously with estimation of the β coefficients, is not part of the test for cointegration. The latter relies on the cointegrating coefficients, β.

Interpreting the absolute magnitude of the coefficients is not meaningful since there is arbitrary normalization so that the coefficient on the trust variable equals one. Regarding the coefficient magnitudes in the specification with CFR, there are sizable differences in magnitudes compared to the other specifications; this is because CFR has a very different scale than the government spending variables as well as somewhat different correlations with the other variables.

We considered use of other events/scandals but they seemed to have no effect on the analysis.

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Titel: The growth of government, trust in government, and evidence on their coevolution
verfasst von: Steven Gordon
John Garen
J. R. Clark
Publikationsdatum: 10.08.2018
Verlag: Springer US
Erschienen in: Journal of Economics and Finance / Ausgabe 3/2019
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-018-9453-y

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