Trust and economic growth in a democratic power shift: an empirical study of Taiwan

Purpose – This study aims to explore the impact of the movement from “authoritarian democracy” to full democracy on the relationships between trust with economic growth and investment. Design/methodology/approach – Simple regression models were applied to Taiwan as a case study. Findings – Results indicate that: the direct effect of social trust on growth was significant regardless of the democratic power changeover; the indirect effect through fixed investment was significant only after the transfer of political power; and the direct effect of political trust on growth and the indirect effect through fixed investment were both significant only after the transfer of political power. Research limitations/implications – The time span of the data used for the regression models in this paper is only ten years, which constrains the number of control variables used in the model. Practical implications – This study indicates that the political regime plays as a contingency to the essay of social capital and economic growth. Originality/value – This paper first provides a detailed investigation to specify the effects of social trust on economic growth during the first democratic power changeover.