The chips are down: The influence of family on children's trust formation
Corrado Giulietti, Enrico Rettore & Sara Tonini
#2016-041
Understanding the formation of trust at the individual level is a key
issue given the impact that it has been recognised to have on economic
development. Theoretical work highlights the role of the transmission of
values such as trust from parents to their children. Attempts to
empirically measure the strength of this transmission relied so far on
the cross-sectional regression of the trust of children on the
contemporaneous trust of their parents. We introduce a new
identification strategy which hinges on a panel of parents and their
children drawn from the German Socio-Economic Panel. Our results show
that: 1) a half to two thirds of the observed variability of trust is
pure noise irrelevant to the transmission process; 2) this noise
strongly biases the parameter estimates of the OLS regression of
children's trust on parents' trust; however an instrumental variable
procedure straightforwardly emerges from the analysis; 3) the dynamics
of the component of trust relevant to the transmission process shed
light on the structural interpretation of the parameters of this
regression; 4) the strength of the flow of trust that parents pass to
their children as well as of the sibling correlations due to other
factors are easily summarised by the conventional R2 of a latent
equation. In our sample, approximately one fourth of the variability of
children's trust is inherited from their parents while two thirds are
attributable to the residual sibling correlation.
JEL Classification: J62, P16, Z1
Keywords: Trust, Intergenerational transmission, Siblings correlations,
Cultural transmission