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The dynamic interplay of inequality and trust—An experimental study

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  • Greiner, Ben
  • Ockenfels, Axel
  • Werner, Peter

Abstract

We study the interplay of inequality and trust in a dynamic growth game, in which trust increases efficiency and thus allows higher growth of the laboratory economy in the future. We find that trust (as measured by the percentage of wealth invested in a trust game) is initially high in a treatment starting with equal endowments, but decreases over time. In a treatment with unequal endowments, trust is initially lower yet more robust. The disparity of wealth distributions across economies mitigates over time. Our findings suggest that both the level and the (exogenous or endogenous) source of inequality matters for the dynamics of trust.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 81 (2012)
Issue (Month): 2 ()
Pages: 355-365

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Handle: RePEc:eee:jeborg:v:81:y:2012:i:2:p:355-365

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Inequality; Trust; Growth; Laboratory experiments;

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Cited by:
  1. Xiao, Erte & Bicchieri, Cristina, 2010. "When equality trumps reciprocity," Journal of Economic Psychology, Elsevier, vol. 31(3), pages 456-470, June.
  2. Xiao, Erte & Bicchieri, Cristina, 2008. "When Equality Trumps Reciprocity: Evidence from a Laboratory Experiment," MPRA Paper 9375, University Library of Munich, Germany.

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