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The Long Shadow of Income on Trustworthiness

Author

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  • Ermisch, John

    (University of Oxford)

  • Gambetta, Diego

    (University of Oxford)

Abstract

We employ a behavioural measure of trustworthiness obtained from an experiment carried out with a sample of the general British population whose individuals were extensively interviewed on earlier occasions. These previous interviews allow us to have very good income measures, and in particular to construct a measure of relative income that uses past income as a reference point. Our basic finding is that given past income, higher current income increases trustworthiness and, given current income, higher past income reduces trustworthiness. Past income determines the level of financial aspirations and whether or not these are fulfilled by the level of current income affects trustworthiness. But past income has a disproportionately large effect on trustworthiness compared to that predicted by the relative income theory, and this leads us to suspect that past income may also capture heterogeneity in relevant subjects’ dispositions, with more opportunistic subjects being less trustworthy and having higher average incomes. We suggest and estimate a two-tier model in which relative income has the same positive effect within each past income class, but people in higher past income classes have a lower fundamental levels of trustworthiness.

Suggested Citation

  • Ermisch, John & Gambetta, Diego, 2011. "The Long Shadow of Income on Trustworthiness," IZA Discussion Papers 5585, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp5585
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    References listed on IDEAS

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    1. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    2. Bellemare, Charles & Kroger, Sabine, 2007. "On representative social capital," European Economic Review, Elsevier, vol. 51(1), pages 183-202, January.
    3. John Ermisch & Diego Gambetta & Heather Laurie & Thomas Siedler & S. C. Noah Uhrig, 2009. "Measuring people's trust," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 172(4), pages 749-769, October.
    4. Easterlin, Richard A., 1974. "Does Economic Growth Improve the Human Lot? Some Empirical Evidence," MPRA Paper 111773, University Library of Munich, Germany.
    5. McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
    6. Lynn, Peter & Jäckle, Annette & Sala, Emanuela & P. Jenkins, Stephen, 2004. "Validation of survey data on income and employment: the ISMIE experience," ISER Working Paper Series 2004-14, Institute for Social and Economic Research.
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    Cited by:

    1. Anna Shaleva, 2015. "Uncovering the impact of intergenerational income mobility on interpersonal trust," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-17, December.

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    More about this item

    Keywords

    trustworthiness; relative income;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D10 - Microeconomics - - Household Behavior - - - General

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