Competition breeds trust

This is according to authors of the VoxEU article:

A simple barometer for the state of a culture that has been the focus of much of the new empirical work is the “trust” question – “Do you think that most people can be trusted or that you can’t be too careful in dealing with people?” We investigate how answers to this question, asked for over thirty years in the US General Social Survey (GSS), vary with differences in competition across US states. Since many other things also vary across states, our strategy is to examine an episode where competition changed and track the ensuing changes in trust it caused. We examine the differential timing of financial deregulation across states between 1978 and 1993. As Black and Strahan (2002) argue, this deregulation intensified competition by making it easier for start-up firms to obtain credit. By looking at the number of start-ups and matching them to trust levels, we can see what effect increased competitive entry had on trust.

This seemed to be a strange way to establish causation yet by taking two independent measurements a causal link can be established.

Competition allows for more startups and hence more alternatives to a consumer. Consider the case of a widget maker trying to find a supplier for raw-widgets. Prior to competition he may have been beholden to maybe one or two suppliers. He may also feel that he could not trust them since they would have the power to raise prices.

With more competition he can breathe a little easier. Thus he can "trust" his supplier to be honest. Yet what kind of trust is this? Now suppliers feel that the widget maker can jerk them around by switching from one to another. For lack of any better term we can refer to this as "adversarial trust" similar to the oft-quoted "trust but verify".

Now consider again the case before competition where trust is established via a working relationship that perhaps even leads to the widget maker and suppliers opening up each others books to one another. Is this type of trust different from one derived from competition? This is the kind of trust that sounds similar to cooperation between Japanese manufacturers and their suppliers.

While the study may be able to show conclusively that "trust" can be achieved through competition it does not really get at the question that really matters:
In manufacturing, does it lead to more efficient producers?
In a country does it lead to higher productivity growth?

The kind of trust through competition may not lead to the promised land of economic growth.