The predicting abilities of social trust and good governance on economic crisis duration

Nguyen, Jessica; Tue Dinh; Selart, Marcus Article The predicting abilities of social trust and good governance on economic crisis duration Administrative Sciences Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel Suggested Citation: Nguyen, Jessica; Tue Dinh; Selart, Marcus (2025) : The predicting abilities of social trust and good governance on economic crisis duration, Administrative Sciences, ISSN 2076-3387, MDPI, Basel, Vol. 15, Iss. 4, pp. 1-16, https://doi.org/10.3390/admsci15040123 This Version is available at: https://hdl.handle.net/10419/321267 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Received: 14 February 2025 Revised: 20 March 2025 Accepted: 20 March 2025 Published: 26 March 2025 Citation: Nguyen, J., Dinh, T., & Selart, M. (2025). The Predicting Abilities of Social Trust and Good Governance on Economic Crisis Duration. Administrative Sciences, 15(4), 123. https://doi.org/ 10.3390/admsci15040123 Copyright: © 2025 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/ licenses/by/4.0/). Article The Predicting Abilities of Social Trust and Good Governance on Economic Crisis Duration Jessica Nguyen, Tue Dinh and Marcus Selart * Department of Strategy and Management, Norwegian School of Economics, 5045 Bergen, Norway; [email protected] (J.N.); [email protected] (T.D.) *Correspondence: mar[email protected] Abstract: In all successful economic societies, trust is a unity factor. By contrast, the absence of trust leads to poor economic performance and negative social implications. In this paper, we uncover the relationships among social trust, corruption, and the duration of economic crises. Our theoretical foundation is based on a collection of studies from different academic fields, especially political science, sociology, and economics. We test two hypotheses: Hypothesis 1: Social trust has a negative correlation with the duration time of an economic crisis. Hypothesis 2: Corruption has a positive correlation with the duration time of an economic crisis. Our study is based on two methods: descriptive and econometric analysis. As a first step, we perform a descriptive analysis on a dataset including social trust, corruption, and economic crisis as variables. As a second step, we apply econometric techniques to analyse our data. For the hypotheses, we introduce a multiple regression with control variables. Our dataset includes 11,364 observations distributed across 211 countries. The quantitative findings support Hypothesis 1 suggesting that, as the duration of economic crises increases, social trust declines. Similarly, when the duration of the economic crisis decreases, social trust increases. Hypothesis 2 was rejected. Connecting our theoretical stance with the empirical evidence, we propose several possible explanations for the findings and provide both theoretical and practical implications. Keywords: trust; corruption; economic crisis; public policy; social justice 1. Introduction From time to time, the media asserts that corruption hinders economic growth and keeps corrupt nations from advancing further on their economic journey. There is no doubt that corruption plays a key role in the development level of a country. No country is free of corruption or the responsibility for finding international solutions to it, though the problem is generally more widespread in low-income than wealthier countries (Søreide, 2016). Because government intervention transfers resources from one party to another, it unfortunately also creates room for corruption (Acemoglu & Verdier,2000). What factors determine the wealth of a nation? A general consensus is that technology, natural resources, and physical and human capital constitute such factors (Jorgenson,1991). However, from a social capital theorist perspective, the positive and negative social forces within each society can either harm or strengthen the affluence of a nation (Ostrom & Ahn,2009). From this standpoint, a less familiar factor emerges and plays a key role in assessing the level of wealth—namely, social trust. Prior research reveals that there is a strong relationship between corruption and social trust (Rothstein,2005). Several links may connect economic crisis with corruption and social trust. In all successful economic societies, trust is a unity factor (Fukuyama,1995). By contrast, the absence Adm. Sci. 2025,15, 123 https://doi.org/10.3390/admsci15040123 Adm. Sci. 2025,15, 123 2 of 16 of trust leads to poor economic performance and negative social implications. Corruption and social trust are closely linked through mutual connections with inequality. This is because a dishonest government results in higher inequality and lower social trust (Rothstein, 2005). In addition, several studies have examined the relationship between crime and employment, earnings, and labour market conditions (see Fougère et al.,2010;Lin,2008;Raphael & Winter-Ebmer,2001). Despite evidence that economic crisis and crimes are potentially related, few studies have focused on the relationship between economic crisis and corruption. Nevertheless, there is research that has focused on the relationship between social trust and economics (Uslaner,2002;Graeff & Svendsen,2013;Knack & Stephen,2001;Bjørnskov,2012; Deng et al.,2012), as well as between social trust and corruption (Rothstein,2005,2013;Sun & Wang,2012;Boix & Posner,1998). Still, until today, there is no study that has focused on the interrelationships between economic crisis, social trust, and corruption in society. Since there clearly is a gap here, there is a call for studies in this particular area. First, in Section 2, we present our theoretical framework along with the hypotheses. In this part, we conduct a literature review of what has been published, examining the most recent studies on social trust, economic crisis, and corruption. Second, in Section 3, we present our methodology and empirical approach. In this part, we begin with a presentation of the used databases and then introduce the analytical techniques and adjustments made while structuring the databases. Third, in Section 4, we introduce our empirical model, before discussing the weaknesses of our data. We also focus on the results of our descriptive and econometric analyses. The purpose of the descriptive analysis is to illustrate the possible correlations among the variables. In the econometric analysis, we consider whether the duration of economic crises is related to social trust and corruption. Finally, we discuss the results with respect to theoretical and practical implications, present the limitations, and offer ideas for further research. 2. Theory and Hypotheses Social trust is defined as the faith people put in the society to which they belong (Taylor et al.,2007). One reason for the growing interest in social trust is that it is positively correlated with many other factors in social science (Rothstein,2005). Citizens who have high trust in their communities are also likely to have positive views of democratic institutions. They also participate more actively in politics, give more to charity and show more empathy to minorities in their societies. In addition, these people tend to be more satisfied and to have greater beliefs in their abilities to influence their own lives (Dinesen & Thisted, 2013;Leung et al.,2011). On a societal level, countries whose citizens have high trust have better democratic institutions, possess more open economies, have higher economic growth and have less crime and corruption (Bjørnskov,2009;Richey,2010;Rothstein,2013). 2.1. Creation of Social Trust The causes of social trust have long been the subject of debate among social researchers (Rothstein,2013). Two main perspectives have a bearing on social trust. The first is the society-centred approach (Stolle & Hooghe,2003). Researchers who share this perspective believe that citizens of a society generate social trust through their engagement in social activities, especially volunteering. However, this approach does not align well with empirical research (Delhey & Newton,2003;Rothstein,2013), which argues that there is a self-selection problem at hand, such that people who participate in voluntary associations are already high-trust citizens. In addition, voluntary activities do not contribute to the improvement of social trust among organizational members (Stolle & Hooghe,2003). The second perspective holds that social trust results from the level of equality in a society (Rothstein,2005). Equality comes in two types: economic and opportunity. Economic equality is easier to measure because it can be quantified by how resources are redistributed Adm. Sci. 2025,15, 123 3 of 16 among members of a society. Equality of opportunity, however, is a more crucial form of equality because, even in the case of economic inequality, policies that support equality of opportunity can play an important role in improving social trust. An example of this is investment in universal education programs, as education has the potential to strengthen the economic prospects and is one of the most critical factors to enhance social trust (Brehm & Rahn,1997). The second perspective is the institution-centred approach. Supporters of this approach believe that an honest, incorrupt, and efficient government is a key factor for the development of social trust in a society (Rothstein,2013). These supporters also believe in a strong correlation between high-trust societies and incorrupt governments. Using survey data, the research also concludes that honest political institutions positively contribute to interpersonal trust (Bjørnskov,2009;Freitag & Buhlmann,2005). 2.2. Social Trust and Economics From an economic standpoint, social trust has a positive effect on the economy of a nation. Social trust reduces the cost of third-party interference among economic actors (Uslaner,2002). It thus facilitates transactions while decreasing the costs of controlling, such as the costs tied to government intervention. As a result, the saved resources can be invested in other beneficial activities, such as education and infrastructure, to the benefit of the overall growth of the economy (Graeff & Svendsen,2013). In a high-trust environment, time and effort are expended more effectively because investors do not need to worry about the validity of their agents. As a result, higher productivity is likely to evolve (Knack & Stephen,2001). Evidence also indicates that trust affects education, rule of law, and government quality. Together, these three factors increase the investment rate and provide a positive impact on economic growth (Bjørnskov,2012). Furthermore, social trust can improve human capital, enhance government efficiency, and strengthen the positive effects on economic growth (Deng et al.,2012). 2.3. Corruption and Its Origins According to Søreide (2016), corruption is defined as the trade in decisions that should not be for sale. The word is associated with illegal activities that abuse authority to gain personal benefits. Corruption can also be applied to culprits who demand and facilitate trade in decisions through bribery. Consequently, corruption weakens the foundation of government authority and destroys the basis for state development. It is therefore considered a very serious form of crime. There is no country in the world that is free of corruption. However, the problem is more severe in low-income countries than in wealthier nations (Søreide,2016). Many researchers believe that corruption in higher-income countries or countries that have better-performing institutions may be underestimated. The reason is that, in these countries, corruption happens in more subtle forms and usually with better concealment (Søreide,2016). The rate of extortive corruption is often higher in poor countries, while the rate of collusive corruption is not significantly related to income levels (Søreide,2016). Nevertheless, the types of corruption that are usually studied may not be the most dangerous ones. Cronyism, which is the connection between powerful business leaders and politicians, is usually regarded as more destructive and more difficult to measure than other forms of corruption (Lambsdorff,2015). However, evidence suggests that poorer countries with less effective governments also suffer from cronyism (Fisman & Miguel,2010). Overall, there is currently a wide-ranging literature arguing that objective levels of corruption are notoriously difficult to determine or assess. Corruption perception or expert-determined scales of corruption are therefore often used as proxies. Corruption on a political level is particularly detrimental to development, because politicians and business leaders exert excessive control over resources that are imperative Adm. Sci. 2025,15, 123 4 of 16 for development (Acemoglu et al.,2001). Another example is rent-seeking. It implies improving one’s share from existing resources without creating new wealth for the society. Thus, rent-seeking dwindles economic efficiency because skilled agents use their time and capability to capture the rents rather than participating in productive activities (Collier & Goderis,2007;Kolstad & Wiig,2011;Robinson et al.,2006). 2.4. Social Trust and Corruption From a political standpoint, incorrupt and honest governments promote social trust inside a community, while corrupt and inefficient governments destroy trust among people (Rothstein,2005,2013;Sun & Wang,2012). By interacting with corrupt officials, citizens not only lose trust in institutions but in other people in their communities (Rothstein,2013;Sun & Wang,2012). According to Rothstein (2013), one of the reasons for this phenomenon is that it is impossible for a normal citizen to measure the trust of all the people in a society. Citizens generalize their beliefs about the trustworthiness of public officials to the whole population. If they have a negative experience with public officials, they are not likely to trust ordinary citizens. In addition, they relate to other people as being untrustworthy, because they believe others also engage in corrupt activities through contact with corrupt public officials. As a result, they consider themselves to be corrupt individuals and thus lose trust in themselves. Research also shows linkages between corruption and inequality that affect social trust indirectly (Uslaner,2012). The link between equality and trust can be casually explained by two reasons (Rothstein,2005). First, economic inequality and low equality of opportunity increase pessimism among the poor. Because they feel that societies do not treat them fairly, especially in the education and labour markets, they begin losing trust in others who possess more resources. Second, when the level of inequality is high, people do not believe that they share a common destiny. The income gap between the rich and the poor further separates the two groups, because neither group regards itself as part of a larger entity. Instead, this separation strengthens the negative stereotypes about each group, degrading the level of trust to an even lower point. It thus becomes more difficult to close the gap between the groups (Boix & Posner,1998). In addition, the link among trust, corruption, and inequality can be shown by distinguishing between generalized and particularized trust. Generalized trust refers to the trust in all people regardless of the differences between groups in a society. By contrast, particularized trust reflects the close relationship between similar individuals, in terms of economic situation, gender, and social class. Particularized trust also implies the distrust of those outside one’s own social circle (Uslaner,2002). Corruption can only promote particularized trust. In a corrupt society, public officers only reward the people who show loyalty to them (Rothstein,2005). Corrupt politicians also steal resources from the state to enrich themselves and their immediate business circle (Uslaner,2012). Particularized trust is the exact opposite of social trust because it damages the relationship between people from different backgrounds (Uslaner,2002). In a society in which people care less for those outside their own social group, social trust cannot exist. This is because each group only care about its own interests, at the expense of the needs of the other group. Group members may even perceive demands from the other group to be in conflict with their own well-being, leading to more resentment and social conflict. Eventually, the rich and the poor cannot reach a common understanding and are bound to be further separated from each other. These effects create a social trap of inequality and low trust in societies that already have a high level of corruption. Therefore, corruption maintains a high level of inequality that worsens social trust in an endless and continuing cycle that seems impossible to break (Uslaner,2012). Adm. Sci. 2025,15, 123 5 of 16 2.5. Economic Crisis Duration and Its Consequences The duration of a crisis increases with the complexity of it, and complexity is related to the severity of the impact (Laeven & Valencia,2018). For example, longer and more complex crises are associated with larger capital outflows and worse outcomes in terms of output loss and inflation. Higher inflation tends to accelerate purchases as consumers anticipate rising prices in the short term and buy products in the hope that they will be more expensive tomorrow. Laeven and Valencia (2018) defined crisis duration as the start and the end of a crisis. The end date of a crisis period refers to the year before both real gross domestic product (GDP) growth and real credit growth are positive for at least two consecutive years. Research on the financial crisis of 2007–2008 found that the crisis affected countries and individuals of different social classes unequally (Sachweh,2018). Normally, the impact of a crisis is associated with an increase in state responsibility, greater welfare support, and redistribution of wealth (Blekesaune,2013;Naumann et al.,2016). However, this association is not homogeneous because of the differences in social class positions, national economic conditions, and social spending levels (Chzhen,2016;Mertens & Beblo,2016; Sachweh,2018). On an individual level, a stronger perceived crisis impact is associated with more favourable attitudes towards welfare state support (Fraile & Fons,2005;Jeene et al.,2014). However, welfare state support is less related to a perceived crisis impact when social spending is higher, indicating that encompassing welfare states reduce the subjective impact of the crisis (Blekesaune,2013). Unemployment can be a ‘class risk’ if social consequences of economic downturns are distributed unevenly among individuals (Eurofund,2012;Rueda,2012;Sachweh,2018). In general, members of disadvantaged social groups (e.g., low-income earners, low-skilled workers, and young people) are exposed to greater social risks during economic downturns than members of privileged groups (Chzhen,2016;OECD,2019). This is because disadvantaged groups have less economic resources to buffer against economic downturns, and this is especially evident over longer periods (Kluegel,1988). As such, they are more dependent on state benefits to maintain their standard of living than members of more privileged groups. In addition, people from disadvantaged groups often have smaller social networks that could work as additional social support during an economic crisis (Reeskens & van Oorschot,2014). Incidentally, during the 2007–2008 financial crisis, the increase in social spending in European countries was lowest in the countries that were most affected by the crisis. This indicates that there are differences in countries’ capacities to handle the effects of economic downturns (Leschke & Jepsen,2012). European welfare states still differ in their institutional design and generosity, as well as in their social and labour market policy responses to a crisis (Scruggs & Allan,2006;Starke et al.,2013;van Hooren et al.,2014). The study by Hariri et al. (2016) on developing countries indicates that economic shocks, such as unanticipated currency devaluations, have a strong and negative causal effect on how people rate their living conditions and sense of well-being. This research is consistent with earlier findings showing that a financial crisis adds a non-negligible cost to individual well-being, and that macro-economic movements strongly influence perceived happiness on a national basis (Di Tella et al.,2003;Montagnoli & Moro,2014). Furthermore, Dix-Carneiro and Kovak (2015) discovered that the long-term recovery of employment rates after an economic shock is fully dependent on the development of the informal sector. This suggests that informal employment keeps individuals from engaging in crime. It also indicates that labour regulations, which reduce informality and increase unemployment, can intensify the level of crime related to an economic crisis. Still, local crises that cause a reduction in labour demand may affect crime in different ways, such as by decreasing government revenues and affecting the supply of public goods (Dix-Carneiro et al.,2017). Adm. Sci. 2025,15, 123 6 of 16 It is hypothesized that societies with high social trust and less corruption can handle a crisis better than their counterparts. By contrast, high corruption and low social trust intensify the crisis duration. Several research findings agree that social trust plays a key role in the development of a country (Rothstein,2005). A high level of social trust is positively correlated with stronger democratic institutions and higher economic growth and negatively correlated with the level of crime and corruption (Bjørnskov,2009;Richey,2010;Rothstein, 2013). Social trust is also rooted in an honest and incorrupt government (Bjørnskov,2009; Freitag & Buhlmann,2005;Rothstein,2013). For this reason, the cost of controlling economic agents is considerably lower in high-trust communities (Uslaner,2002). Moreover, social trust reduces interference from governments and encourages business transactions. As a result, infrastructure and welfare policies benefit because governments have larger funds to invest in them (Graeff & Svendsen,2013). We argue that social trust can counteract the consequences of an economic crisis to a certain extent, because efficient governments can detect errors faster and can manage challenges better. Furthermore, everyday businesses may even take advantage of the crisis to restructure their organizations, improve technology, and develop their human resources. In addition, a low level of corruption means that public funds can be employed more optimally for the recovery of a country. Nevertheless, a lack of trust may increase the gap between rich and poor social groups and, most importantly, promote corruption (Uslaner,2012). Countries with a high level of corruption often ignore their potential to uplift the economy (Søreide,2016). Evidence also shows that an economic crisis presents serious challenges to national security because it increases crime levels (Dix-Carneiro & Kovak,2015). In addition, corruption reduces a country’s ability to protect its national resources, which make them more vulnerable to embezzlement (Kolstad & Wiig,2011). Thus, during economic crises, high corruption will increase the resentment of the poor social groups towards the elites and the governments. In addition, affected citizens may take the crisis as an opportunity to challenge the government and its management of the economy. As a result, the reduced financial budgeting during an economic crisis is further restrained to tighten security control and to protect the corrupt government from public anger and higher crime rates. These factors worsen the recovering abilities of nations and increase the duration of an economic crisis. Hypothesis 1. Social trust has a negative correlation with the duration time of an economic crisis. Hypothesis 2. Corruption has a positive correlation with the duration time of an economic crisis. 3. Method 3.1. Presentation of Databases The dataset of social trust and corruption that we applied came from the Quality of Government (QoG) Institute database (https://qog.pol.gu.se/data/datadownloads (accessed on 20 December 2019)) developed by the University of Gothenburg. The database comprises five datasets and is freely available from the QoG Institute’s website. The mission of the database is to provide good governance. We exclusively worked with the QoG standard database, which is the largest dataset of the five and includes almost 2100 variables from more than 100 data sources. We also used the Global Crises Data by Country database. 1 This database includes data related to banking, systemic malfunctioning, and inflation crises measured during a period spanning from 1800 to 2016 in more than 70 countries. The Behavioral and Financial Stability (BFFS) project was founded at Harvard Business School, and the Global Crises Data by Country is part of the BFFS project’s database. The project maintains an ongoing real-time database of financial stability indicators and is available to both researchers and the public. Adm. Sci. 2025,15, 123 7 of 16 3.2. Analysis Techniques Our study is based on two methods: descriptive and econometric analysis. As a first step, we perform a descriptive analysis on a dataset including social trust, corruption, and economic crisis as variables. The intention of the descriptive analysis is to glean insight into whether there are significant correlations between the duration of economic crises and social trust/corruption. As a second step, we apply econometric techniques to analyse our data. The purpose of the econometric analysis is to assess the connections between the dependent and independent variables. For the hypotheses, we introduce a multiple regression with control variables. We select the control variables to be able to exclude factors that can significantly affect the interpretation of the empirical results. In this mission, we use the software package STATA 14.0 (Wooldridge,2016) as a basis for our analyses. 3.3. Structuring of Data In Table 1, we compare the assortment of the original datasets with our dataset. After scaling, we kept all the countries and reduced the number of variables from 2202 to 9. Consequently, the number of observations in our dataset is reduced to ~74% and includes 11,364 observations distributed across 211 countries. However, we collect the dataset from different public sources and, consequently, some of the variables may lack observations. Furthermore, we exclude extreme variables in the econometric analysis. Therefore, the regressions may differ in the number of observations from what we state here. Table 1. Downscaling of the dataset. Number of Countries and Territories Number of Observations Number of Variables Original datasets 211 15,403 2202 Our dataset 211 11,364 9 Percentage 100% 73.78% 0.41% In addition, we created a dummy variable for the economic crises when at least one crisis is occurring in a specific year in a country (1 = at least one crisis in this year and country, 0 = no crisis in this year and country). The reason for this is to observe the effects on the regression models when there was at least one ongoing crisis. Consequently, the number of observations in the econometric analysis is reduced to 5112 observations (44.98%). In the following subsections, when no specific changes are mentioned, we make no adjustments to the variables. 3.4. Dependent Variables Again, the crisis duration is the period from the start to the end of a crisis. In the Global Crises Data by Country database, each crisis—whether it is related to banking, systemic malfunctioning, or inflation—has a dummy variable for when a crisis is occurring in a specific year and country (1 = crisis, 0 = no crisis). To measure the crisis duration, we add a dummy variable for when at least one of the crises is occurring in a specific year in a country. Then, we count the number of consecutive crisis years to measure the duration of the economic crises in each country. As a result, we measure the crisis duration in a number of years between the start and the end of the crisis. The skewness of the crisis duration variable is 0.84, which makes it acceptable for further analyses (George & Mallery,2011). 3.5. Independent Variables When people have social trust, they put faith in one another in a society. In the QoG standard database, social trust is reported as an index score. The index score represents Adm. Sci. 2025,15, 123 8 of 16 an average of all country–survey scores available within each country–year observation. These scores range from 0 (lowest level of trust) to 100 (highest level of trust). A higher level of social trust is correlated with stronger democratic institutions and higher economic growth. These factors are the foundations of economic equality (Bjørnskov, 2009;Richey,2010). Additionally, social trust arises from economic equality and is also a product of equality of opportunity and incorrupt governments (Rothstein,2005). This indicates that a high level of equality in turn will increase the level of social trust or vice versa (Uslaner,2012). Since the economic growth and equality gap of each nation are changing constantly, the social trust index should be dynamic in nature. Corruption is defined as the abuse of public power for private gain. We use the Bayesian Corruption Index (BCI), obtained from the QoG standard database, to represent the corruption level. The BCI is a composite index of the perceived overall level of corruption and ranges between 0 (everyone agrees there is no corruption at all) and 100 (corruption is as bad as it can get). Studies have shown that low-income countries seem to suffer more from corruption than their wealthier counterparts (Søreide,2016). For that reason, we believe that the severity of corruption tends to decline as nations strive to improve their economic conditions. On the other hand, it also implies that, when the economic situation deteriorates, the level of corruption will increase as a result. Additionally, corruption is regarded as one of the main obstacles for the advancement of economy and society (Søreide,2016). As serious as it may sound, corruption hinders economic growth and social development. This is because corrupt agents abuse their political power by essentially trading public benefits for personal gain. Almost any country in the world realizes these problems and tries to eliminate, or at least reduce, the level of corruption. Consequently, governments keep improving policies and laws against corruption. The capability of these laws and policies depends on various factors, such as the independence of the courts, as well as the governments’ transparency and the institutions’ effectiveness. Nevertheless, these laws and policies are bound to have some effect on corruption levels over time. For these reasons, it is safe for us to conclude that corruption and social trust are not static but dynamic in nature. This is important to keep in mind, since neglecting the dynamic aspects in the analysis may lead to a specification error in the regressions. 3.6. Control Variables Population capabilities can affect how well the citizens of a country handle challenges and how well they are able to process news from economic crises. To measure population capabilities, we use the Human Development Index (HDI) obtained from the QoG databases. The HDI is a composite measure that captures the average achievements in three essential dimensions of human development: health, knowledge, and standard of living. Equality has the potential to affect the level of social trust and corruption. Higher levels of inequality may create distrust among different social classes and worsen the level of social trust. To be able to measure equality, we use the Gini index obtained from the QoG databases. The Gini index measures the degree of inequality in the distribution of family income by country. The more equal a country’s income distribution, the lower is the Gini index (Gini = 0). The more unequal a country’s income distribution is, the higher is the Gini index (Gini = 100). 4. Results 4.1. Empirical Specifications Interpretation of any empirical econometric analysis must be based on relevant theories to provide sound results. In this research, we use a panel data model because our dataset provides a time series for each country unit. We limit the regression analysis only to periods Adm. Sci. 2025,15, 123 15 of 16 Lambsdorff, J. G. (2015). Preventing corruption by promoting trust—Insights from behavioral science. Passauer Diskussionspapiere, Volkswirtschaftliche Reihe,69(15). Leschke, J., & Jepsen, M. (2012). Introduction: Crisis, policy responses and widening inequalities in the EU. International Labour Review, 151(4), 289–312. [CrossRef] Leung, A., Kier, C., Fung, T., Fung, L., & Sproule, R. (2011). Searching for happiness: The importance of social capital. Journal of Happiness Studies,12(3), 443–462. Lin, M.-J. (2008). Does unemployment increase crime? Evidence from U.S. data 1974–2000. Journal of Human Resources,43(2), 413–436. Mertens, A., & Beblo, M. (2016). Self-reported satisfaction and the economic crisis of 2007–2010: Or how people in the UK and Germany perceive a severe cyclical downturn. Social Indicators Research,125(2), 537–565. [CrossRef] Michie, J. (2020). The COVID-19 crisis—And the future of the economy and economics. International Review of Applied Economics, 34, 301–303. [CrossRef] Mirowsky, J., & Ross, C. E. (2005). Education, cumulative advantage, and health. Ageing International,30(1), 27–62. [CrossRef] Montagnoli, A., & Moro, M. (2014). Everybody hurts: Banking crises and individual wellbeing (SERPS no. 2014010). Department of Economics, University of Sheffield. Naumann, E., Buss, C., & Bähr, J. (2016). How unemployment experience affects support for the welfare state: A real panel approach. European Sociological Review,32(1), 81–92. [CrossRef] Nguyen, J., & Dinh, T. (2019). Towards a model of economic crisis, social trust & corruption. Norwegian School of Economics. OECD. (2019). Society at a glance 2019: OECD social indicators. OECD Publishing. [CrossRef] Ostrom, E., & Ahn, T. (2009). The meaning of social capital and its link to collective action. In G. Svendsen, & G. Svendsen (Eds.), Handbook of social capital. The troika of sociology, political science and economics (pp. 17–35). Edward Elgar. Raphael, S., & Winter-Ebmer, R. (2001). Identifying the effect of unemployment on crime. Journal of Law and Economics,44(1), 259–283. [CrossRef] Reeskens, T., & van Oorschot, W. (2014). European feelings of deprivation amidst the financial crisis: Effects of welfare state effort and informal social relations. Acta Sociologica,57(3), 191–206. [CrossRef] Reinhart, C. M., & Rogoff, K. S. (2009). This time is different: Eight centuries of financial folly. Princeton University Press. Richey, S. (2010). The impact of corruption on social trust. American Politics Research,38(4), 676–690. [CrossRef] Robinson, J., Torvik, R., & Verdier, T. (2006). The Political foundations of the resource curse. Journal of Development Economics,79, 447–468. [CrossRef] Rothstein, B. (2005). All for all: Equality, corruption, and social trust. World Politics,58, 41–72. [CrossRef] Rothstein, B. (2013). Corruption and social trust: Why the fish rots from the head down. Social Research,80(4), 1009–1032. [CrossRef] Rueda, D. (2012). West European welfare states in times of crisis. In N. G. Bermeo, & J. Pontusson (Eds.), Coping with crisis: Government reactions to the great recession (pp. 361–409). Russell Sage Foundation. Sachweh, P. (2018). Conditional solidarity: Social class, experiences of the economic crisis, and welfare attitudes in Europe. Social Indicators Research,139(1), 47–76. [CrossRef] Saunders, M., Lewis, P., & Thornhill, A. (2016). Research methods for business students. Pearson. Scruggs, L., & Allan, J. P. (2006). Welfare state decommodification in 18 OECD countries: A replication and revision. Journal of European Social Policy,16(1), 55–72. [CrossRef] Soss, J. (2001). Unwanted claims: The politics of participation in the U.S. welfare system. Social Service Review,75(4), 691–693. Søreide, T. (2016). Corruption and criminal justice: Bridging economic and legal perspectives. Edward Elgar. Starke, P., Kaasch, A., & van Hooren, F. (2013). The welfare state as crisis manager: Explaining the diversity of policy responses to economic crisis. Palgrave Macmillan. Stolle, D., & Hooghe, M. (2003). Generating social capital: Civil society and institutions in a comparative perspective. Palgrave/Macmillan. Sun, W., & Wang, X. (2012). Do government actions affect social trust? Cross-city evidence in China. Social Science Journal,49, 447–457. [CrossRef] Taylor, P., Funk, C., & Clark, A. (2007). Americans and social trust: Who, where and why. Available online: http://www.pewresearch.org/ wp-content/uploads/sites/3/2010/10/SocialTrust.pdf (accessed on 20 December 2019). Tella, R. D., & MacCulloch, R. (2009). Why doesn’t capitalism flow to poor countries? Brookings Papers on Economic Activity,40(1), 285–332. Thomas, V., Wang, Y., & Fan, X. (2001). Measuring education inequality: Gini coefficients of education (English) (Policy, Research working paper no. WPS 2525). World Bank. Available online: http://documents.worldbank.org/curated/en/361761468761690314/ Measuring-education-inequality-Gini-coefficients-of-education (accessed on 20 December 2019). Uslaner, E. (2002). The moral foundations of trust. Cambridge University Press. Uslaner, E. (2012). Trust and corruption revisited: How and why trust and corruption shape each other. Quality & Quantity, 47(6), 3603–3608. Adm. Sci. 2025,15, 123 16 of 16 van Hooren, F., Starke, P., & Kaasch, A. (2014). The shock routine: Economic crisis and the nature of social policy responses. Journal of European Public Policy,21(4), 605–623. [CrossRef] Wooldridge, J. M. (2016). Introductory econometrics: A modern approach. Cengage Learning. Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.