Does Trust Matter? Corruption and Environmental Regulatory Policy in the United States

This study shows that the level of trust matters for how corruption affects public policy outcomes in the long run, in particular with regard to the stringency of environmental policies. We argue that the level of trust affects the relative strength of industry and environmental lobby groups, and therefore the effects of corruption. We construct a unique index measuring the reflection of corruption in each state using Associated Press (AP) state news wires. We estimate the long-run cointegrating relationship between environmental policy, corruption, and trust using Dynamic OLS. We find that higher corruption reduces the stringency of environmental policies when the level of trust is low, but has little or no effect at higher levels of trust.