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Markets and values competition builds trust

Intensified competition and trust

A straightforward barometer for the state of a culture that is the focus of a lot of the brand new empirical work may be the “trust” question – “Do you consider that most people could be trusted or that you can’t be too careful in working with people?” We investigate how answers to the question, asked for over thirty years in america General Social Survey (GSS), vary with differences in competition across US states. Because so many other activities also vary across states, our strategy is to examine an episode where competition changed and track the ensuing changes in trust it caused. We examine the differential timing of financial deregulation across states between 1978 and 1993. As Black and Strahan (2002) argue, this deregulation intensified competition by rendering it easier for start-up firms to acquire credit. By looking at the amount of start-ups and matching them to trust levels, we are able to see what effect increased competitive entry had on trust.