June 2014

IZA DP No. 8277: Trust and the Welfare State: The Twin Peaks Curve

published in: Economic Journal, 2016, 126 (593), 861-883

We show the existence of a twin peaks relation between trust and the size of the welfare state that stems from two opposing forces. Uncivic people support large welfare states because they expect to benefit from them without bearing their costs. But civic individuals support generous benefits and high taxes only when they are surrounded by trustworthy individuals. We provide empirical evidence for these behaviors and this twin peaks relation in the OECD countries.