The Upsides and Downsides of Generalized Trust: The Moderating Role of Democratic Institutions

Abstract Does generalized trust play a role in the public's tax compliance? Traditional wisdom claims that generalized trust can affect the public’s compliance with paying taxes by reducing concerns about free-riders and facilitating public goods provision. However, there is little empirical evidence of a statistically significant relationship between generalized trust and tax morale in comparative studies. Using data from the World Values Survey and European Values Study trend file (1981–2020; N = 609,240 across 112 countries/territories), I show that generalized trust is negatively associated with tax morale in less democratic contexts, but this effect diminishes as democratic institutions strengthen. These findings are robust across alternative model specifications and subsample analyses. These results highlight the importance of institutional development in moderating the behavioral effects of social trust and provide insights into the limits of generalized trust as a civic virtue under weak governance.