The impact of formal institutions on social trust formation: A social-cognitive approach

While formal institutions are recognized as having an effect on trust formation, no theoretical or empirical models exist to formalize this relationship. This study introduces a new conceptual framework to explain trust building by individuals and the role that formal rules and laws may play in this process. Drawing on a social-cognitive theory of psychology, we present trust as composed of personal, interpersonal, and intrapersonal components with the latter encompassing formal institutions. We further demonstrate that there are three mechanisms – sanction, legitimacy, and autonomy – through which formal institutions may affect trust levels either directly or indirectly. In addition, our empirical analysis furnishes evidence of heterogeneity in institutional effects on trust, suggesting that the autonomy dimension of the institutional framework is particularly important for trust formation processes