Institutional Incentives and Trust - Wiley Online Library

Institutional Incentives and Trust: Marginalized Groups and the Creation of Trust in Local Government n Sean Richey, Georgia State University Ken’ichi Ikeda, University of Tokyo Objectives. There is an important theoretical debate concerning whether institutional trust can be created. Since very few governments actually try to promote trust directly, it has been difficult to test this debate empirically. To investigate this debate, we examine an innovative new program in Japan that is specifically designed to promote trust in institutions—community currencies. Methods. We use propensity score matching to determine if community currency program participation in Japan increases institutional trust. Results. We find that participation increases institutional trust. Additionally, we find that supporters of political parties with little political power receive a greater impact from program participation. Conclusions. These results show that institutional trust can be increased by participation in incentive programs of cooperation, and suggest that members of marginalized groups will benefit more from program participation.

Is it possible for government to make people more trustful of it? In response to low levels of political trust, an innovative program was started by Japanese local governments to increase trust in institutions: community currencies. Community currencies reward volunteers who contribute to the local area with credits they can use only in local stores or governmental facilities. These credits provide an incentive to work with the local government on common goals. Based on a long line of research in social psychology, reformers posit that working with the city to achieve goals will engender institutional trust. There has been an explosion of these programs in Japan, with more than 600 being created and potentially reaching about a quarter of the population. We placed questions about community currency usage on a nationally representative survey in September 2005 to determine the impact of program participation. We find that community currency involvement increases institutional trust, which shows that institutions can create social capital. Additionally, we find that supporters of political parties n Direct correspondence to Sean Richey, Assistant Professor, Department of Political Science, 38 Peachtree Ctr. Ave., Ste. 1005, Atlanta, GA 30303 [email protected]. We will share all data and coding information with those wishing to replicate the study. Please contact Sean Richey for a copy of the web Appendix mentioned below. We thank Ru¨diger SchmittBeck for his beneficial comments on this research.

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outside the mainstream receive a greater impact from program participation, suggesting that marginalized groups will benefit from incentive programs of inclusion. Recent research suggests that trust in local government is important because it overcomes various social traps that arise from a reluctance to sacrifice to solve common community goals (for a review, see Rahn and Rudolph, 2005:530–31). The success of these programs suggests that other types of incentive programs may also be successful. Theoretically, this research also provides evidence for a debate over the nature of institutional trust. On one side, some researchers dismiss the government’s ability to increase institutional trust, which they equate to a loss in critical analysis of the government’s performance (e.g., Hardin, 2002). In this view, trust in general institutions can only lead to blind allegiance and unthinking agreement with powerful elites, who should instead be scrutinized. On the other side, scholars see trust in institutions as important and potentially malleable (e.g., Hetherington, 2004). They argue that one can trust the system and bureaucracy, have generally hopeful and positive feelings toward the local area, be willing to sacrifice for the common good, and still be watchful over elected officials (Rothstein, 2000). If, however, people do not trust their government they are less likely to sacrifice for the common good and, thus, the political benefit of institutional trust is very important (Hetherington, 1998, 2004). Japanese Corruption and Political Trust

Trust in government in Japan had reached a deplorable level by 2000 (Inoguchi, 2002). This distrust was chiefly caused by decades of scandals, which were relentlessly covered in the media (Pharr, 2000). Examples of local officials taking bribes for construction projects were everyday stories for years in Japan (Blechinger, 1998). The local government has more power in Japan than many early scholars thought, especially in running Japan’s heavily Keynesian economy (Steiner, 1965; Muramatsu, 1997). The massive bureaucracy and public-works projects that are central to the Japanese economy are rife with the potential for corruption at the local level (Mitchell, 1996). In Japan, the local governments have had increasing autonomy to control these projects through a series of new laws, which has only exacerbated the problem of corruption (Reed, 1996). The public has reacted to the corruption by losing trust in public officials (Pharr, 2000). Chang and Chu (2006) clearly show the relationship between beliefs of corruption and distrust of government in several East Asian nations, including Japan, by using a structural equation model that accounts for endogeniety. In sum, much research shows that the large levels of corruption in Japan led to a low level of political trust. It is in response to this lost trust that the community currencies programs gained widespread use. The loss of public trust was deemed by reformers to

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be an impediment to an active civil society (Lietaer, 2003). These programs were created to familiarize the average public with the benefits of local government by promoting greater interaction with it (Doteuchi, 2002). The incentives provided by the program were aimed at encouraging skeptical citizens who did not trust the local government to become more involved with the town and, in turn, more trusting of it. It is important to know whether government can design successful interventions into the public’s trust. Social traps can arise from societies with low institutional trust, as powerful interest groups take advantage of the disillusionment and apathy to sway crooked politicians (Rothstein, 2005). The corruption will only further lessen institutional trust, and this vicious cycle becomes a social trap. The benefits of trust have been shown in many settings, as societies with more institutional and generalized trust are more efficient and better working, with more normatively desirable properties such as equality and health (Chan, Cheung, and Peng, 2004; Dasgupta, 1988; Hetherington, 2004; Inoguchi, 2002; Kawachi et al., 1997; Knack and Keefer, 1997; Uslaner, 2002). Some researchers have also found that institutional arrangements promote trust (Coleman, 1990; Edwards, 2004; Edwards and Foley, 2001; Knack and Zak, 2002; Levi, 1998; Rothstein and Stolle, 2003). If institutional trust is desirable, it is in a local government’s interest to promote it, and this research is one of the first direct tests of whether government can overtly increase trust. This research is also important because if trust increases for marginalized groups, it may point toward a solution for their incorporation into mainstream society through incentive programs. Japan’s Liberal Democratic Party (LDP) has dominated politics, with almost exclusive rule since 1955. Although the new Democratic Party of Japan (DPJ) has been increasing in power, there are also several opposition parties that represent views far outside the mainstream, such as the Japanese Communist Party (JCP) or New Komeito,1 which is associated with the new religion, Soka Gakkai. The combined total members of these outsider parties is not trivial; as the data below show, they total around 22 percent of the population. Anderson and Tverdova (2001) show that supporters of parties who lose elections are less trusting of government than the supporters of winning parties. Thus, our theory is that those who have been shut out of power in the post-1955 system will receive a greater benefit from participating with town officials because their outsider status has reduced trust in the system. Due to the internalization of frustration that comes from being an outsider, we posit that people from the political margins will be more influenced by working with the town. Their newly increased trust will help incorporate them into the public sphere. 1 New Komeito is now in the coalition government with the LDP, so it is perhaps wrong to label them opposition. Yet, Soka Gakkai adherents—which are a very high majority of New Komeito supporters—are certainly outside of mainstream Japanese society. As a sensitivity test, we ran the models below by not including New Komeito supporters in with other opposition supporters, and the outcome was substantively similar.

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This research proceeds as follows. First, we discuss the relationship between community currencies and trust. Then we review the data sources and methods of analysis. Next, we determine if community currency involvement influences institutional trust, and conclude by discussing the results. Community Currencies in Japan

There is little sophisticated empirical research on the impact of community currencies; however, there have been many experiments with community currencies, particularly in Europe. In the United States, the Ithaca Hours program is more than 20 years old, and there is some evidence that it makes participants feel better about their town (Jacob et al., 2003). These programs are designed to stimulate local trust and social capital (Harper, 2001:22). Japan, however, has the most programs and the most innovative designs (Lietaer, 2003). Japan has hundreds of community currencies (Izumi, 2002), and there are programs in every prefecture. The national government, through the Ministry of General Affairs, gave grants to cover some programs’ administrative costs, which encouraged their spread (Lietaer, 2003). Japanese governments already promote civic engagement through neighborhood associations (Pekkanen, 2003), and these grants are a part of the national government’s plan to support stronger communities (Doteuchi, 2002). Sequential experiments were funded at various sites throughout Japan to allow programs to learn from previous successes and mistakes. Most local governments, however, pay for currency projects on their own. All programs have three things in common. First, they reward volunteers with credits. Second, these credits are usable only at specific program venues in the town, such as to gain admission to the town swimming pool in lieu of a cash payment. Third, and most importantly, these programs are expressly intended to increase trust in local government. For example, the Tekona currency in Ichikawa, Japan lists increasing local trust as the major goal of the program in its manual. The idea is to create incentives to volunteer, which will motivate those not likely to participate. There is, however, variation in program details that is a concern for our data, which are aggregated in a national sample. The Japanese have created many variations of community currency programs because they are designed at the local level and, thus, vary in the programs’ policies. The first variation is in what can be purchased with the credits earned by volunteers. For example, a volunteer in a rural area may be able to redeem credits for agricultural products grown by local farmers, while urban volunteers may use credits for admittance to the popular public baths (Sento). The second variation is in the type of voluntary activities, some are simple town improvement projects, such as cleaning litter, while other programs allow participants to volunteer for projects that they have


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expertise in, such as teaching children traditional arts and crafts or folkdancing. Others reward attendance to important town meetings. The third variation is in the mode of currency. Some use simple written accounts, such as in Matsue. Others, such as in Yamato, use sophisticated IC card technology that controls the balance in each account, similar to mass-transit cards used in the United States. These distinctions, however, do not limit testing of our hypothesis because all programs share the plan of increasing trust by increasing cooperation. Determinants of Trust

The stated goals of the reformers who created these programs can easily be accessed in their mission statements. They often cite the declining trust in local government as a detriment to having the public actively cooperating with town projects. The theory is that providing incentives will encourage people to volunteer, and that the cooperation experienced when volunteering will create trust, which will facilitate future cooperation. Many classic studies in social psychology provide empirical support for the reformer’s prediction that cooperation promotes trust (Deutsch, 1949; Lewin, 1935; Sherif et al., 1961:ch. 7), and all these studies have been frequently replicated with modern samples. Important to this research is that there is a very large literature on the contact hypothesis—also known as the intergroup contact theory and by various other names—which simply states that contact between members of different groups will ease intergroup hostility under the correct conditions (for a review, see Pettigrew and Tropp, 2006). By working together, people from different groups develop trust in each other. Related to this, cooperative learning experiences increase trust in teachers and schools (i.e., institutions), and this result has been replicated in hundreds of studies (Johnson and Johnson, 1998). Institutions have been found to work with the political culture to produce trustful behavior, such as producing Japan’s high rate of return for lost-and-found items (see West, 2003). In sum, working together has been shown to generate trust. Some scholars, however, doubt that trust in politics can be increased. Logically, they argue, if we envision trust as a prisoner’s dilemma—with individual citizens on one side and politicians on another—then citizens would be foolish to blindly trust politicians, generally, without monitoring their conduct. The standard survey question of ‘‘Do you trust your local government?’’ does not have meaning, they argue, because it does not specify a particular person and, therefore, the respondent cannot ascertain the trustworthiness of an unspecified politician. Hardin (2002) points to theorists such as Madison who argue for constant vigilance over politicians, and he argues that generalized trust in institutions is not necessary or wise. The only way to increase trust in politics, in this view, is to have the politicians act in a more trustworthy way. The only way institutional trust can have meaning is

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if it is directed toward specific actors who have been monitored in an iterative process, and not in general institutions. There are three ways community currencies may increase trust in local politics despite these critiques. First, people may view the institution separately from politicians and remain skeptical of members of government. In other words, the actions of governments are not simply the free will of politicians, but those actions are limited and encouraged by institutional arrangements, which are quite apart from the politicians themselves (see Immergut, 1998). For example, one can trust the Japanese Constitution will keep us safe from tyranny, even though one is distrustful of a prime minister’s desire for power. In this example, one is confident in the institution—that is, the Constitution—and not the politician. The prisoner’s dilemma metaphor is thus not applicable to trust in politics because the procedures and laws of government are not going to defect in the game. It is easier to ascertain whether the institutions are trustworthy if you know the level of control the institutional rules have over government officials. If volunteering and attending town meetings assures citizens that these procedures are strong, then program participation may increase trust in local politics, generally. Second, people may start from an irrationally high level of distrust. Irrational distrust produces no benefits in the prisoner’s dilemma, and it is possible that many citizens start from false assumptions about politicians. The promotion of interaction through incentives can start the iterative monitoring process for citizens who are not involved in town politics, and allow for a more accurate assessment of politicians. Madison stresses that politicians must be watched because they are not angels, but he did not suggest that we start by assuming that they are devils. Community currencies may help overcome irrational prejudices against government officials by rewarding cooperation and sponsoring interaction with town officials. This is particularly true of members of groups that are outside of mainstream society. The dominance of the LDP may mean that non-LDP supporters feel that government is against them, even when the local bureaucracy may not have such antipathy. They may join to obtain the rewards, but in the process learn about the town. Participating in positive common experiences with the city may help outsiders develop an accurate assessment of the trustworthiness of the government in total, which may be more trustworthy than the outsiders previously believed. Third, Hardin’s logic assumes a high level of rationality. Even if the critique of why trust should not increase is valid, the program could actually increase it due to bounded rationality (see Tversky and Kahneman, 1981). It is well known that the average public lacks sophisticated political thinking and the program may work despite the limitations espoused by Hardin (2002) because people may not understand the need to be ever-vigilant. Even under the Hardin perspective, then, it is important to know the results of this program because the program may increase trust, even though it is not wise. In this case, the programs will be detrimental because they will


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initiate a false consciousness of trustworthiness, when in fact the citizens would be better off keeping a critical eye on government. Thus, we should examine this effect empirically because it is possible that community currencies can increase institutional trust. Our theory, then, is that community currency incentives encourage cooperation with the town, which will engender local institutional trust. Thus, we can state two testable hypotheses from this theory: (1) program usage increases institutional trust and (2) program usage has a greater impact for supporters of parties from the political margins.

Data

The data are from a nationally representative sample survey, the Japan Election Study 3 (JES3).2 The JES3 is the Japanese equivalent of the American National Election Study and is regularly used in social science research on Japan (e.g., Ikeda, 2007).3 The survey has an N 5 1,511, and a response rate of 71.4 percent from the previous wave of JES3 panel data, conducted with face-to-face interviews. The sample was chosen by randomdigit dialing, with a follow-up in-person interview about one week after the 2005 elections. The data and coding will be available on my website for replication. The dependent variable—LOCAL TRUST—is measured by how trustful the respondent is of local politics, coded from 0 if not trustful, 1 if somewhat not trustful, 2 if somewhat trustful, and 3 for basically trustful. The key causal variable is whether or not the respondent uses a community currency program, and this is a dichotomous variable, with two categories, user coded 1 and nonuser coded 0. The base category in the regression models below is people who had a currency in their town and chose not to use it (17 percent of the sample). There is also a group that is excluded from this analysis, which is people who do not have a currency in their town. Seventy-seven percent said they did not have one in their town. Excluding this group controls for the potential that certain towns had growing institutional trust, and that is what led to the creation of the currency in the town. Since the reference category are people who live in the town with a currency program but chose not to use it, the model controls for this potential spuriousness. This does not, however, control for an endogenous relationship between usage and the dependent variable, which we address with a matching model below. Other determinants of institutional trust must also be controlled. 2 Full details on the sampling procedure and response rates are available at http://ssjda.iss.utokyo.ac.jp/en/index.html. 3 See Web Appendix 1 for question wordings and Web Appendix 2 for a table of summary statistics.

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To control for the respondent’s general feelings toward government, we follow Rahn and Rudolph (2005:539) and include a measure of trust in the national government, which should highly correlate with trust in local government. It is clear to all participants that these programs are from the local government because the name in Japanese—Chiiki tsuka—means local money. The programs also clearly state they are created by the local government, so joining a currency program will not impact national trust. National trust is measured by how trustful the respondent is of national politics, coded from 0 if not trustful, 1 if somewhat not trustful, 2 if somewhat trustful, and 3 for basically trustful. Number of political acts is coded by counting the number of the following political acts that the respondent has done: voted in an election, participated in a self-governing body or neighborhood association, contacted a local influential person, contacted a politician/official out of necessity, went to an assembly or public office to petition or lobby, participated in assemblies pertaining to an election or politics, helped in an election campaign, participated in civic/resident movement, signed a petition, made a donation or participated in fundraising, participated in a demonstration, spoke out about politics on the Internet, voiced an opinions by writing/calling/appearing in the mass media, and either avoided, or actively bought, certain goods based on a political/ ethical/environmental reason (Cronbach’s a 5 0.70). The ATTENDED DEBATES variable controls for the likelihood that the respondent will be involved with the town by measuring whether the respondent was involved in debates about local education, environment, welfare, and consumer issues, coded as 2 for a couple of times or more, 1 for once or twice, or 0 for never (Cronbach’s a 5 0.81). To create the variable, we used a principal component analysis of the responses for each type of debate and obtain one factor (eigenvalue 2.90). Organized voluntary activity is known to influence institutional trust. It is an indictor of the psychological disposition to trust organizations, and volunteering may also give an improved image of organizations generally. To determine involvement with FORMAL SOCIAL NETWORKS, we create an index by asking the respondent to select from a list of common Japanese voluntary associations the ones to which he or she affiliates and how often.4 We create the FORMAL SOCIAL NETWORKS variable by summing the number of voluntary associations the respondent joins. Each association is coded according to the degree of involvement. The answer very actively involved is coded 3, somewhat actively involved 2, limited affiliation 1, and no involvement 0 (Cronbach’s a 5 0.79). How much efficacy one feels toward influencing the government has been found to alter Japanese trust (Freitag, 2003). Efficacy is coded from 0 if the respondent thinks he or she has no power over 4 The types of groups are joining a resident association, alumni association, parent-teacher association, farmers’ cooperative, trade association, consumer cooperative, volunteer group, or a religious group.


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government, 1 if somewhat, 2 if some power, and 3 if powerful. Socioeconomic factors affect trust and unless controlled can bias the results. The socioeconomic variables we control for are being MALE, AGE in years, EDUCATION by degree attainment, and INCOME in 2,000,000 yen categories. Methods

A concern is that people with more trust may join the program more than less trusting people. Thus, the higher trust for users may be because they have more trust from the start. It is difficult to measure causation with crosssectional data because of problems such as this one. To help with this problem, this research uses the Rubin causal model to determine the impact of program participation (Imai and van Dyk, 2004). In this model, we have to estimate a counterfactual—for example, how much trust a community currency user would have if he or she did not join the community currency program—because we can observe at most only one outcome from each unit. This is part of a common problem with social science research, which is that observational studies cannot randomly assign members to groups as in experimental research, and this creates a type of bias (Rosenbaum, 2002). This assignment bias comes from insufficient similarity between test and control groups (Rosenbaum and Rubin, 1983). The data show clear differences between users and nonusers. For example, users have more trust, but people who trust more may want to join the program more than nontrusting people. We do not know the assignment mechanism, that is, why people joined. An easy fix of assignment bias is available. This bias can be reduced through matching pairs of similar cases from the data (Heckman, Ichimura, and Todd, 1998). Matching is a powerful tool that is widely employed to discover more precise estimates of causal relationships (Rosenbaum, 2002). However, a large number of control variables and possible inclusion of continuous variables makes it almost impossible to find enough cases that are exactly similar in covariates such as education, age, race, and income (Ho et al., 2007). One solution is to use propensity scores instead of exact matching (Ho et al., 2007). Propensity scores will reduce bias and show clearer causal relationships (Woodbridge, 2002:614–21). The propensity score method creates a scalar that estimates each respondent’s probability of belonging to the test or control groups (Rosenbaum, 2002). Propensity scores are the estimated probability of joining the program, that is, probability of assignment in the causal variable (Imai and Van Dyk, 2004:856). This is estimated by running a regression model where the casual variable becomes the dependent variable, and using other independent variables to calculate the predicted probability of joining a community currency for each respondent. Then, this propensity score can be used to balance the data in subclasses, which is equivalent to matching (Imai, 2005), and mea-

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sure the average causal effect. After matching by subclassification with propensity scores, the impact of the causal relationship is much clearer. Balance is achieved by subclassifying the data into smaller groups of similar people. One problem is how to subclassify cases by similar propensity scores that will result in balancing all variables. Becker and Ichino (2002) developed a software package that ensures that the choice of subclassification is balanced. We use the Pscore5 and ATTK (Becker and Ichino, 2002) packages for Stata to create the propensity score to balance the data, and calculate the average causal effect, with bootstrapped bias-corrected standard errors and t test statistics.

Results

The Propensity Score I estimate the average treatment effect on the treated using kernel-based matching.6 The results show that there is a difference in the types of people who are users and nonusers. Each respondent’s propensity score predicts the likelihood of joining the community currency program, based their NATIONAL TRUST, ATTENDED DEBATES, EFFICACY, POLITICAL ACTS, FORMAL SOCIAL NETWORKS, GENDER, AGE, EDUCATION, and INCOME. To accurately test the impact of usage, we need to replace this lack of overlap by matching similar people based on the propensity score. To create the propensity score, we use the other independent variables to predict the probability that a person will join a community currency program. Based on this score, we created groups of very similar people to compare the impact of program usage.

Balance of the Subclassification It is crucial that each of the subclassified groups are similar in all variables (Ho et al., 2007). This means that all independent variables—such as age— should be similar for test and control groups in every level of subclassification (Rosenbaum and Rubin, 1983). The Pscore program tests if the groups are balanced by a two-sample t test of equal variances. Thus, the test and control groups must have a nonsignificant difference between all independent variables in each subclassified group to be balanced. The process was completed for NATIONAL TRUST, ATTENDED DEBATES, EFFICACY, POLITICAL ACTS, FORMAL SOCIAL NETWORKS, GENDER, AGE, EDUCATION, and INCOME. In 5

These Stata packages are available from the authors at http://www.sobecker.de/. One may be interested in the direct regression results, without matching. To address this possibility, we ran an ordered logistic regression. The regression model finds that community currency users have a statistically significant increase in LOCAL TRUST of about one-third of a standard deviation, or 0.20 out of a scale of 4. 6


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each subclassified group, all variables were found to have nonsignificant differences. Thus, the types of people in these groups are very similar.7 With balanced data, we can safely compare users to nonusers, average and weight the final score, and determine the impact of program participation. Average Treatment of the Treated Effects Table 1 shows that the average causal effect of using a community currency on TRUST was 0.23 (with a standard error of 0.11), while holding all control variables constant (NATIONAL TRUST, EFFICACY, POLITICAL ACTS, FORMAL SOCIAL NETWORKS, GENDER, AGE, EDUCATION, and INCOME). That is about a third of a standard deviation change in LOCAL TRUST. This is a better estimate of the effect because it controls for assignment bias. The results suggest that this program changed the participants’ attitudes toward local government by promoting community involvement. Institutional promotion of participation is associated with more trustful feelings in comparison groups of very similar people. These results suggest that government can increase trust in government through programs that sponsor social interaction with government officials. Impact by Party Identification It is also interesting to see if this impact has partisan characteristics. We first establish that supporters of these outsider parties do in fact have less trust than LDP supporters.8 To test this possibility, we split the data into people who are supporters of LDP, DPJ, and other parties collectively labeled as Opposition. There are too few supporters of any of the five other parties (New Komeito, Japanese Socialist Party (JSP), JCP, New Party Nippon, and People’s New Party) to run a maximum likelihood model, so we combine them. Although these parties have disparate policy views, they share a common and consistent failure in obtaining power through electoral politics, which is the crucial point for the theory. We hypothesize that their outsider status will make them less trusting of government, including local government. We ran an ordered logistic regression model for each party identification variable, and a model including demographics. Both models show clearly that those who are not supporters of the dominant LDP have less trust in local politics. As we have established that party identification does influence trust in local politics, we now determine if participation in a community currency program has differential effects for supporters of the nonhegemonic party. 7 8

These groupings are shown in Web Appendix 3. See Web Appendix 4 for a table of these results.

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Social Science Quarterly TABLE 1 Average Treatment Effect of Usage on Trust

A.T.T. Local trust Nonusers N Users N

0.23 n 250 95

S.E.

t Test

0.11

2:00

n po 0.05. NOTE: Cells represent the average treatment on the treated effect (A.T.T.) using kernel-based matching, with bias-corrected bootstrapped standard errors (S.E.), and t test statistic for propensity score matching on NATIONAL TRUST, ATTENDED DEBATES, EFFICACY, POLITICAL ACTS, ATTENDED DEBATES, FORMAL SOCIAL NETWORKS, GENDER, AGE, EDUCATION, and INCOME.

FIGURE 1 Average Treatment Effect by Party Identification

NOTES: This graph shows that community currency usage increases trust in local politics mostly for supporters of a party outside the mainstream. The lines represent the 90 percent confidence intervals for the average treatment effect of community currency involvement on trust in local politics, while holding all else constant.

We ran the same matching by propensity score modeling separately for each party identification. The propensity score for each party identification was checked for balance as before.9 Each group based on party identification was successfully balanced as all variables in all blocks show a nonsignificant difference. 9

See Web Appendix 5 for the subclassification by party identification.


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The results show that Opposition community currency users have a statistically significant average treatment effect in LOCAL TRUST of about half a standard deviation, or 0.40 out of a scale of 4. The DPJ and LDP models show similar effects, or a predicted increase of 0.50 and 0.38, respectively. However, as the sample size is much lower, the standard errors have increased to the point where neither the LDP or DPJ models community currency usage is significant at the po 0.05 level. From these results we can determine that those from the margins of political society had the clearest impact from program participation. This suggests that marginalized groups can be incorporated in the larger society through incentive programs that sponsor cooperation. Conclusion

Community currency programs in Japan effectively increase trust in local government. This impact was shown using matching with propensity scores to eliminate assignment bias. The loss of trust generated from decades of corruption scandals is troublesome for civil society. If we worry that the lack of political trust will prevent citizens from allowing their tax dollars to go toward needed programs, then community currencies are beneficial in raising institutional trust by encouraging civic engagement. We also find that providing incentives for community involvement will benefit societies that have a clearly dominant political party, such as the LDP, where many citizens are likely to feel frustration with the government and not necessarily trust it. Current debates on immigrant incorporation can use this evidence to create programs to make marginalized groups more a part of mainstream society. Studies of mainstream citizens regularly uncover an irrational fear of government abuse. In particular, the Japanese public’s apathy toward politics and experiences with corruption make it desirable for government to reacquaint the public with its better side. These programs provide an incentive to work toward the greater good and teach participants about the benefits of collective action. With a positive view toward the potential of working with government to solve problems—rather than fighting against governmental problems—it is only natural for trust in that institution to increase. This empirical evidence provides support for the continued expansion of community currency programs and the development of new programs designed to incentivize active cooperation with government. The social-psychological literature is clear that cooperation creates trust, and by cooperating with the town in these projects or group meetings, trust in the town was created. Future research on the impact of community currencies should focus on the disparate impact of different types of program procedures. This national survey could not specify the impact of a particular type of program. Case studies of individual projects will be helpful in analyzing the differing impact of program designs. Also, we do not know how much volunteering is

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required to have an impact. Perhaps those who have never volunteered for the town will require only a few outings to have a substantial impact or perhaps the issues of trust are only malleable in certain subpopulations; we cannot address these issues with our data. Case studies of particular programs, with focus groups for participants, will add much understanding to these more general results.

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