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AbstractThis paper contributes to the literature on the determinants of trust by investigating how the quality of local services influences individuals' generalized trust and trust in local governments. Using data from Italian national statistical office (Istat) Aspects of Daily Life survey, after building a new measure for the quality of local services, we study its effect on individuals' trust using linear regressions techniques. Our findings suggest that good local public services have a positive impact on individuals' trust, the effect being stronger for trust in local institutions. Our results are robust to potential endogeneity issues, tested using a two-step GMM estimation procedure, and to potential omitted variables bias, according to the method proposed by Altonji et al. (2005).

SummaryWe document that trust has a positive impact on the generosity of welfare spending. Our analysis relies on a unique dataset including detailed budgetary data of more than 2,000 Italian municipalities. Compared with previous contributions based on cross‐country data, our approach reduces the risk of omitted variable bias and measurement errors. Furthermore, drawing on Italy's rich political history, we are able to use an instrumental variables strategy that addresses the possible endogeneity of trust.