1. The document summarizes research on how trust is transmitted across generations from parents to children, especially from mothers to children. It uses data on children of immigrants to show that a child's level of trust correlates with the average level of trust in the mother's country of birth, suggesting trust is inherited culturally. 2. Higher inherited trust leads children to make "good" economic choices like pursuing more education, higher-skilled work, and entrepreneurship, which in turn leads to higher income and better health. It accounts for over 40% of economic differences across ethnic groups. 3. Paternal influences on a child's trust also exist but differ - children are more influenced by political institutions in the father's birth

1. Cultural transmission of traits
and individual choices:
A roadmap
Martin Ljunge
Kauffman Foundation,
July 22nd 2015

2. The world according to economics
1. Preferences (ordering of wants)
2. Technology (available choices)
3. Equilibrium (supply equals demand)
• 1-3 yield individual choices and market outcomes
• Preferences usually taken as given, examine
how technology affects choices.
• But (some) preferences are acquired and affect
choices.

3. Social economics study
“preferences”
• How are “preferences” shaped? Cultural
transmission
• How do preferences/norms/beliefs affect choices
and outcomes

4. Cultural transmission
• Intergenerational transmission of traits
• In the family
– By parents, vertical transmission
• In society
– By people in general or institutions, horizontal transmission
• I study transmission in the family, and how these
traits affect outcomes

5. Which preferences?
• Trust is a prime example
• Religion, risk preferences, social preferences,
work norms, civic attitudes, gender attitudes,
family values, locus of control, individualism vs
collectivism, pragmatism, …

6. Trust
• “Virtually every commercial transaction has within
itself an element of trust, certainly any transaction
conducted over a period of time. It can be plausibly
argued that much of the economic backwardness in
the world can be explained by the lack of mutual
confidence.” Arrow (1971)
Measure of generalized trust:
• “Would you say that most people can be trusted, or
that you can't be too careful in dealing with people?”

7. Trust around the world
• Highest in Scandinavia
– Almost 2 in 3 people express high trust
• Lowest in Latin America and Africa
– Brazil, 1 in 17 trust
• U.S. and other Anglo-Saxon countries fairly high
– About 2 in 5 trust

8. What is trust
• Beliefs
– Expectations about the trustworthiness of others
• Preferences
– Personality/character trait, cf. Almlund et al (2010)
– Trust related to betrayal aversion and risk preference, Fehr
(2009)
– Intergenerational persistence of trust, evidence from
immigrants
• Trust measures an optimistic character trait

9. The problem
• Cross-sectional correlations probably capture
causality in both directions
• Both trust and outcomes observed in the same
context
• Trust may affect choices and
outcomes
• … but your experience may shape
your trust as well

10. Addressing reverse causality
• If trust is transmitted across generations the trust
of the parent is a measure of the child’s trust
• Correlating child’s trust with the parent’s is a step
forward, Dohmen et al (2012, ReStud)
– Yet both trust measures from same families, the child’s
experience can influence his and the parents’ trust

11. Children of immigrants
• Children born in the destination country, different
context from the parent’s birth country
• Solution: relate child’s trust to trust in the
immigrant parent’s birth country
• The child’s trust cannot plausibly affect trust in
another country – causality, if any, must run from
parent to child

12. Model sketch
1. Parent’s trust à
2. Child’s trust à
3. Child decides to explore potentially productive
opportunities (or not) à
4. Child outcomes realized

13. Children of Immigrants
• Regress the child’s trust on average trust in the
parents country of birth
– Account for shared influences, within birth country variation
– Reverse causality is not an issue
Trusticat=b0+b1*Mean_Trusta+b2*Xicat+gc+Tt+eicat
– c - country of residence, a - ancestral country, c≠a
– gc, Tt country and year fixed effects
– Standard errors clustered by ancestral country

15. Data
• European Social Survey (ESS)
• Includes country of birth of individual and parents
– Children of immigrants in 29 European countries
– Parents born in 87 countries across the world
– 2nd to 5th rounds of ESS
• Trust computed across the waves in the
integrated European/World Values Survey

16. Controls
• Country of residence fixed effects
• Demographic controls
– Age, gender, education, labor force status, income, marital
status, religion
• Ancestral country controls
– Trust, GDP per capita, institutions, etc.

17. Mother’s trust matters

18. Quantitatively significant
• An increase in the mother’s ancestral trust of one
standard deviation corresponds to a half the
effect of an upper secondary education
(compared to less education) or moving from the
bottom three deciles of the income distribution to
the top three deciles.

19. Robust to level of development, institutions
Women’s labor market role also important

20. Mother’s trust more important than father’s

21. Sufficiently high trust persists in low trust
environment

22. What about fathers?
• Ancestral trust not significant predictor of child’s
trust
• But father’s still matter in trust formation
• Political institutions in the father’s birth country
strong predictor of child’s trust

23. Historical tech better than current development

24. Father’s and mother’s influence
differs
• Why?
• Could be that mother’s are more involved in the
social interactions of the child
• And father’s could be more about rules (more or
less hierarchical), which may be influenced by
political institutions in the ancestral country

25. Inherited trust (mother’s) predicts:
• Higher income
• Source of income
– More income from entrepreneurship and wages, less from
benefits
• Time use
– More time spent working, less in retirement &
unemployment
• Education attainment
– More human capital
• Occupations with
– Higher skill content
– Greater autonomy
• Better health

26. Relative importance of trust
• Trust accounts for 43% of the explained
variation in income differences across ancestries
• Regress income on country of origin dummies,
plus individual controls and country fixed effects
• Regress country of origin coefficients on
– Log(GDP) and six WDI institutional characteristics, R2=.15
– Add ancestral country Trust to model above, R2=.263

27. Trust and Entrepreneurship
• Trust promotes successful entrepreneurship
since those with high trust are more likely to
have entrepreneurial income as their main
income source
• Trust may promote more entrepreneurial
occupations as those with higher trust have more
work autonomy
• Moreover, trust promotes individualism, a
motivation behind entrepreneurship, and
creativity, useful for developing ideas

28. Recap
• Ancestral trust shapes trust of children of
immigrants
• Ancestral trust predicts “good” economic choices
• Evidence trust à economic success
– The method avoids reverse causality
• The approach can be used to study other
influences and other outcomes

29. References
• Ljunge, Martin. Trust Issues: Evidence on the Intergenerational
Trust Transmission from Children of Immigrants. Journal of
Economic Behavior and Organization, 2014, Volume 106, pp.
175-196. Open Access
• Ljunge, Martin. Social Capital and Political Institutions:
Evidence that Democracy Fosters Trust. Economics Letters,
122, 2014, pp. 44-49. Open Access
• Ljunge, Martin. Social Capital and Health: Evidence that
Ancestral Trust Promotes Health Among Children of
Immigrants. Economics and Human Biology, 2014, Vol. 15, pp.
165-186. Open Access Länk doi: 10.1016/j.ehb.2014.09.001
• Ljunge, Martin. Social Capital and the Family: Evidence that
Strong Family Ties Cultivate Civic Virtues. Economica, 2015,
82, pp. 103-136.
• Ljunge, Martin. Cultural Transmission of Civicness. Economics
Letters 117 (2012) pp. 291-294.