Great Expectations: The Persistent Effect of Institutions on Culture

This research establishes the persistent effect of institutions on culture exploiting the natural experiment of migration. It advances and empirically establishes the hypothesis that lower institutional quality at the origin country of a migrant is associated with higher trust towards host country institutions. The inflated trust of migrants is documented as the Great Expectations effect and is intriguing in three respects. First it contradicts with the empirically observed attitude of migrants with respect to interpersonal trust, where low quality of institutions is associated with lower interpersonal trust in both the host and the home country. Second, the inflated trust persists for both first and second generation migrants. Third, the effect of home institutions is stronger than the effect of mean trust at home confirming that institutions prevail over culture. The formation of Great Expectations has profound policy implications as it generates lower demand for regulation and reduced political participation. These findings further highlight the interplay between culture and institutions and the spillover effects of institutions operating via migration.