A note on institutional trust and poverty: evidence from Latin America

Abstract

This short paper argues that institutional trust should be considered as an additional factor influencing poverty at the macroeconomic level. By examining a sample of Latin American countries and analyzing annual data from 1995 to 2019 using panel data techniques such as cointegration analysis and panel fully modified least squares, this study estimates the long-term relationships between poverty, economic growth, inequality, and institutional trust. As hypothesized, the empirical evidence suggests that institutional trust also reduces poverty. These findings hold particular significance for Latin America, where inequality levels are relatively high, institutional trust is low, and poverty rates have only recently begun to decline. Therefore, to alleviate poverty, it is crucial to implement public policies that restore and enhance institutional trust.