Proving Bo Rothstein wrong: Why do Swedes trust more? Culture, not welfare state policy.

Sweden and Scandinavia have some of the highest rates of trust in the world, higher than the United States. Trust is not merely fluff to scoff at. Trust and trustworthiness are both signs of a well functioning society and important lubricants for the economy in their own right. Countries with high levels of trust tend to have higher quality of life.

Swedish political science professor Bo Rothstein is one of the people who has claimed that welfare state policies is the cause for high levels of trust in Sweden and Scandinavia. Since trust is good for the economy and society, this would, if true, indeed be a powerful argument in favor of the welfare state.

Rothstein thus writes:

"it is obvious that the countries that score highest on social trust also rank highest on economic equality, namely the Nordic countries, the Netherlands, and Canada. Secondly, these are countries have put a lot of effort in creating equality of opportunity, not least in regard to their policies for public education, health care, labor market opportunities and (more recently) gender equality."

I am going to show to you with a few data points that Bo Rothstein is most likely wrong in his explanation of the the source of Nordic trust.

This paper by other Swedish researchers provides the values for trust for 63 countries from the world value survey.

Sweden has 27% higher trust than the average for the United States. The average of the Nordic countries (Sweden, Norway, Denmark and Finland) have 21% higher trust than the United States.

So far so good for Rothstein's policy-based theory. Welfare state policies and a kind and forgiving society have made trust levels in Sweden and Scandinavia high, whereas Americans living in a brutal market economy cannot trust each other.

My standard critique of this explanation is that it ignores culture, norms and selection. Culture, broadly defined, is tremendously important, and countries with different cultures are likely to have both different outcomes and different policies, without this being an evidence that one caused the other.

So now let's look at trust levels within the U.S, using the General Social Survey (The General Social Survey has large enough sample size to make measurement of small groups meaningful). Millions of Americans are descendants of Scandinavian immigrants. They have lived in the U.S for generations, and their lives are as much influenced by the American (relatively) small government economic system as other Americans.

The results are striking. Americans of Swedish descent have 33% higher trust than average for the United States. Americans of Nordic descent have 39% higher trust than the average for the United States.

How is this possible if the explanation is:

"policies for public education, health care, labor market opportunities and (more recently) gender equality"?

If we notice that Scandinavians in welfare state Scandinavia and Scandinavians in the free-market U.S share the trait of being more trusting than other groups, the most likely explanation is to be found in cultural differences rather than economic policy.

The treatment effect of those policies is virtually identical for all Americans, regardless if their grandfather was Swedish or not. It's not like Americans from Scandinavia living in the Midwest get to enjoy lots of secret welfare state programs that Italians in New Jersey don't have access too. Same country, more or less the same policies. Yet levels of trust are very different within the U.S depending on your cultural heritage.

Once again not accounting for selection ruins the Social Democratic theory: Which states that develop a welfare state is not random. The high trust states have lower costs of doing so. And once again, I show that demography and culture can be more important explanatory variables than policy differences.

Here is a graph plotting trust in countries, with the trust level of people from that country in the U.S (remember, overwhelmingly these are recent not immigrants, but American born people who originated from these countries generations ago).

Both series normalize the average U.S trust level at 1.