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Inequality and Trust

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Abstract

This paper reviews the literature on economic inequality and trust. Cross-country studies, within-country studies, and experiments all suggest that economic inequality exerts a negative influence on trust. Four mechanisms are proposed to explain the negative relationship: social ties (or networks), inference on social relationships (to see inequality as a signal of untrustworthy behavior), conflicts over resources, and opportunity cost of time. Social ties receive the strongest empirical support, but there is also some evidence in favor of inference on social relationships. Conflicts over resources and opportunity cost of time are contradicted by important pieces of evidence.

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  • Jordahl, Henrik, 2007. "Inequality and Trust," Working Paper Series 715, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0715
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    1. Gustavsson, Magnus & Jordahl, Henrik, 2008. "Inequality and trust in Sweden: Some inequalities are more harmful than others," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 348-365, February.
    2. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
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      • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
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    20. Niclas Berggren & Henrik Jordahl, 2006. "Free to Trust: Economic Freedom and Social Capital," Kyklos, Wiley Blackwell, vol. 59(2), pages 141-169, May.
    21. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    22. Leigh, Andrew, 2006. "Does equality lead to fraternity?," Economics Letters, Elsevier, vol. 93(1), pages 121-125, October.
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    Cited by:

    1. Tamilina, Larysa & Tamilina, Natalya, 2018. "Four faces of marginalization: Variations in institutional frameworks of welfare state provisions and social trust in Europe," MPRA Paper 93560, University Library of Munich, Germany.
    2. Bradley Allsop & Jacqueline Briggs & Ben Kisby, 2018. "Market Values and Youth Political Engagement in the UK: Towards an Agenda for Exploring the Psychological Impacts of Neo-Liberalism," Societies, MDPI, vol. 8(4), pages 1-20, September.
    3. Fischer, Justina AV, 2008. "The Welfare Effects of Social Mobility," MPRA Paper 16339, University Library of Munich, Germany, revised Jun 2009.
    4. Guglielmo Barone & Sauro Mocetti, 2016. "Inequality And Trust: New Evidence From Panel Data," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 794-809, April.
    5. Jesper Rözer & Gerbert Kraaykamp, 2013. "Income Inequality and Subjective Well-being: A Cross-National Study on the Conditional Effects of Individual and National Characteristics," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 113(3), pages 1009-1023, September.
    6. Sander Steijn & Bram Lancee, 2011. "GINI DP 20: Does Income Inequality Negatively Affect General Trust? Examining three potential problems with the inequality-trust hypothesis," GINI Discussion Papers 20, AIAS, Amsterdam Institute for Advanced Labour Studies.
    7. Fischer, Justina A.V., 2012. "Globalization and social networks," MPRA Paper 40404, University Library of Munich, Germany.
    8. Xin, Guangyi, 2017. "Trust and Economic Performance: A Panel Study," MPRA Paper 80815, University Library of Munich, Germany.
    9. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, April.
    10. Eric Kemp-Benedict, 2013. "Inequality and Trust: Testing a Mediating Relationship for Environmental Sustainability," Sustainability, MDPI, vol. 5(2), pages 1-10, February.
    11. Justina A.V. Fischer & Benno Torgler, 2007. "Social Capital and Relative Income Concerns: Evidence from 26 Countries," CREMA Working Paper Series 2007-05, Center for Research in Economics, Management and the Arts (CREMA).
    12. Yamamura, Eiji, 2011. "Effect of social capital on income distribution preferences: comparison of neighborhood externality between high- and low-income households," MPRA Paper 32557, University Library of Munich, Germany.
    13. Eric D Gould & Alexander Hijzen, 2016. "Growing Apart, Losing Trust? The Impact of Inequality on Social Capital," IMF Working Papers 2016/176, International Monetary Fund.
    14. Ho-Kong Chan & Kit-Chun Lam & Pak-Wai Liu, 2011. "The Structure of Trust in China and the U.S," Journal of Business Ethics, Springer, vol. 100(4), pages 553-566, June.
    15. Justina A.V. Fischer & Benno Torgler, 2013. "Do Positional Concerns Destroy Social Capital: Evidence From 26 Countries," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1542-1565, April.
    16. Larysa Tamilina & Natalya Tamilina, 2022. "Four Faces of Marginalisation: Variations in Institutional Frameworks of Welfare State Provisions and Social Trust in Europe," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(1), pages 65-92, June.
    17. Gallenstein, Richard A., 2022. "Inequality and risk management: Evidence from a lab experiment in Ghana," Economics Letters, Elsevier, vol. 211(C).
    18. Peng Wang & Jay Pan & Zhehui Luo, 2015. "The Impact of Income Inequality on Individual Happiness: Evidence from China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 121(2), pages 413-435, April.
    19. Fischer, Justina AV, 2009. "The Welfare Effects of Social Mobility: An Analysis for OECD countries," MPRA Paper 17070, University Library of Munich, Germany.
    20. Katarzyna Samson, 2018. "Trust as a mechanism of system justification," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-22, October.

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    More about this item

    Keywords

    Trust; Inequality; Social Capital; Social Ties; Networks;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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