Trust, Trade, andInstitutions
Social Capital and Trade Liberalization Attitudes
in JapanRelationship Between Social
Capital and Trade
Spilker, G., Schaffer, L. & Bernauer, T. “Does Social Capital Increase Public Support for Economic
Globalization?” In European Journal of Political Research vol. 51, (2012), pp. 756-784.

What is Social Capital?
• Social capital can be briefly defined as the varying
levels of trust, norms of reciprocity, and networks
used to collectively overcome social dilemmas• “social glue”• Associated with collective action, goodgovernance, robust economy, democraticefficiency• In its absence, associated with inefficient institutions• “Trust” as the primary indicator of social capital• Generalized Trust & Institutional TrustTrust and Institutions• Institutions, formal and informal, facilitate trust,create norms/rules, enforce against badbehaviour• How institutions are designed affects how theygenerate trust (Rothstein & Stolle, 2008;
Kumlin & Rothstein, 2005)• Impartial, fair, equalizing >>> welfare• How they are arranged can also affect how
they deliver welfare outcomes to generate trust

Varieties of Institutions• Institutions can be based in the state, market,civil society

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PartisanInstitutions

Power-Checking
Institutions

Government
Political Parties
Parliament
Civil Services




Press
Labour Unions

OrderInstitutions

Justice System &Courts
PoliceMarketInstitutions

Major Companies
Banks• The way they interact with each other toprovide social welfare can influence trust• Varieties of Capitalism & Welfare Capitalism Worlds

Institutions and Trade• Domestic institutions change because ofglobalization• Pressures from institutional change affect how
citizens perceive trade liberalization• Putnam (1988) – Two-Level Game Theory• Level II Institutions need compliant constituents toprovide large win-sets for international-level
negotiators

What are Large Win-Sets?
(Putnam 1988)• “The set of all possible Level I agreements thatwould “win” – that is, gain the necessary
majority among the constituents – when simply
voted up or down”• Larger win-sets make Level I (intl level) agreement
more likely• Size of respective Level II win-sets affectdistribution of joint gains from intl bargain• Trust establishes large win-sets by giving intl
level negotiators “more autonomy”

Why analyze this in thecontext of Japan?
• Contentious domestic politics ofTPP, Japan-China-RoK FTA• Do you support Japan’sparticipation in TPP?
Yes

52%

No

25%

• In a late September nationwide poll by the Japan
Association of Public Opinion Research, 86 percent ofrespondents said that the government’s explanations areinsufficient and 55 percent said that the government ishurrying too fast to conclude the talks.”

Why analyze this in thecontext of Japan?
• “Japan is often cited as acountry rich in socialcapital.” - (Inoguchi,2002)• Unique InstitutionalArrangements• “Hybrid” – CME/liberal
welfare state

Vertical Institutional Trust in Japan, World Values Survey% of respondents who have "quite a lot" or "some" confidence in institution X

1009080706050403020100
Wave 1 (1981-1984)

Wave 2 (1990-1994)

Wave 3 (1995-1998)

Wave 4 (1999-2004)

Wave 5 (2005-2009)

World Values Survey Wave
Social Trust

Confidence in Government

Confidence in Political Parties

Confidence in Parliament

Confidence in the Press

Confidence in Labour Unions

Confidence in Civil Services

Confidence in Justice System & Courts

Confidence in Major Companies

Confidence in Banks

Wave 6 (2010-2014)

Institutional Arrangements ofJapan’s Political Economy• Why are partisan institutions not trusted?
• Partisan institutions and indirect provision of welfare• 1960 “Income Doubling Plan”• Labour market-based and familial social policy• Commodification of social welfare• Clientelism – Protectionism – Indirect Intervention• Globalization and the end of bureaucratic guidance• Electoral reform, 1994
• Public disenchantment

Institutional Arrangements ofJapan’s Political Economy• Why are market institutions trusted?
• More direct provision of social welfare via markets• Individual association with major firms leading
source of group identity• Lifetime employment and seniority wages• Firm-level coordination with unions• Globalization has weakened core labour-market
insiders, but perceptions of social protection bylarge firms remainInstitutional Arrangements ofJapan’s Political Economy• News media in Japan• World’s largest circulation of national dailies in Japan• High trust for newspapers, may be due to aging
population• Public dissatisfaction with politics echoed and amplified
by the press• Strength of trust in press can have direct effect onperceptions towards trade• Largely shut out of TPP negotiations; unfavourable
editorials stirring cynicism

How does (mis)trust in these
institutions affect trade attitudes?
• Confidence that institution will maintain or
improve delivery of welfare outcomes despite
free trade• Guaranteed minimizing negative externalities• Producer anxiety, “sympathy” for precariat• Capacity to steer public opinion – national
identity (Canada), the press• Mistrust can politically mobilize organized,concentrated groups

Empirical Analysis
Dependent Variable• Q153 – Do you agree or disagree with thefollowing statement: “Foreign goods are hurting
the local community”• 1 = strongly agree; 2 = agree; 3 = disagree; 4 =strongly disagree• Dummy Var: indicator of positive attitude totrade liberalization• 1 = (3) disagree + (4) strongly disagree• 0 = (2) agree + (1) strongly agree

Empirical Analysis
Primary Independent
Variables for
Investigation• Trust in Institutions• 1 =A Great Deal ofTrust; 2 = Quite a Lot ofTrust; 3 = Not Very
Much Trust; 4 = NoneAt all• Dummy Var Recode:
1 = 1|2; 0 = 3|4

Partisan Institution• Q9 - Trust inGovernment

Order Institution• Q8 – Trust in the Courts

Power-CheckingInstitution• Q16 – Trust inNewspapers

Empirical Analysis
Primary Independent Variables for Investigation• No “trust in market institutions” variable• Q3 – What do you think will be the state of ourcountry’s economic condition a few years fromnow?
• 1 = much better; 2 = a little better; 3 = about thesame; 4 = a little worse; 5 = much worse• Recode 1 = 1 | 2 | 3; 0 = 4 | 5

Empirical Analysis
Producer Anxiety• Anxiety about economic security of precarious
workers has strong effects on attitudes towards
furthering trade liberalization (Scheve & Slaughter,2004)• Effect on actual precariat and “sympathy” for precarious
workers (Naoi & Kume, 2011)• ‘Q152 - Do you agree or disagree with thefollowing statement: “We should protect ourfarmers and workers by limiting the import offoreign goods.”

Empirical Analysis
Farmers• Dummy variable for respondents whoseoccupation is listed as “farmer”• Strong opposition to FTAs
• Formerly politically aligned with LDP; today,
staunch opposition• Testing whether farmers’ mistrust of partisan
institutions has significant effectEmpirical Analysis
Model 1 - Institutional trust variables and generalized
trust variable against dependent trade variable
Model 2 – Control variables are added; include
demographic vars age and sex, factor endowments
education, household income, class – also include
membership in voluntary association
Model 3 – Addition of “producer anxiety” variable
Model 4 – Interaction between partisan trust and farmer
dummy variablesConclusions• Generalized trust insignificant on trade attitudes inJapan• Institutions do have an effect on trade attitudes, andsignificance holds despite displacement variables• Institutions can steer public opinion on trade agenda
issues• Mistrust can activate organized groups against trade• Building larger win-sets means citizens must trust
institutions

Policy Implications• Institutional trust model could be applied to otherdomestic economic policies and country cases• In the short-run, allow media to participate and actively
engage in trade negotiations in TPP and other FTAs
• In the long-run, partisan institutions (the government)
should “invest in social capital”• How can partisan institutions generate social capital?
• Any other policy implications