Market institutions bring tolerance, especially where there is social trust

Abstract

Tolerant societies seem to function better than nontolerant societies both economically and socially. This makes it worthwhile to identify ways to stimulate tolerance. While previous research indicates that market-oriented formal institutions and policies offer such stimulus, it does not investigate what role cultural factors, like social trust, plays. We find that trust is a catalyst: The more there is, the more positive the effect of economic freedom on tolerance. Formal institutions hence interact with the culture of a society and work better as generators of tolerance in alignment with trust.

Keywords:

• markets
• economic freedom
• tolerance
• trust
• institutions

JEL Classification:

• P10
• P48
• Z13

Acknowledgment

The article was partly written when Berggren was on a fellowship from the International Centre for Economic Research (ICER), which is recognized with gratitude.

Notes

¹  The correlation coefficient between trust and tolerance homosexuals is rather low, 0.46, indicating that these two variables measure conceptually distinct things.