Government dishonesty, trust and cooperative behaviour: Evidence from China's Great Leap Forward

Abstract

This paper explores the long-term impact of China's Great Leap Forward (GLF) on current differences in cooperative behaviour across Chinese regions and the underlying trust channel of causality. Combining the current firm-level survey with grain yield over-reporting during the GLF era, we find that past government dishonesty regarding over-reporting in the GLF period has long-term negative consequences on people's behaviours. The firms in the prefecture with a higher degree of yield over-reporting are less likely to engage in R&D collaborations today. Further tests reveal the possible trust channel through which past government dishonesty impedes current cooperative behaviour. We extend the analyses to social norms of trust and show that GLF over-reporting has shifted an individual's internal norms towards a present-day mistrust culture, which contributes to explain the negative effect of GLF over-reporting on cooperative behaviour. Our findings suggest that dishonest behaviours by local governments in the past can lead to lasting adverse effects on an individual's behaviour in the form of mistrust and subsequent lower frequencies of cooperative behaviour, providing new insights on the origins of cultural differences and human behaviours by investigating the role of governments in shaping social and economic interactions.