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Trust, Regulation and Market Failures
Review of Economics and Statistics
Government regulation of firms is associated with more negative externalities and unofficial activity across countries. In this paper I argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention. Using trust in others as a proxy for such concerns, I first show that differences in trust explain a great deal of variation in entry regulations. Then, controlling for average trust in the regression of market failures ondoi:10.1162/rest_a_00209 fatcat:wcdek7e4n5gnfevun7b6apnpna