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Inequality and Trust

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  • Jordahl, Henrik

    ()
    (Research Institute of Industrial Economics (IFN))

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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File URL: http://www.ifn.se/Wfiles/wp/wp715.pdf
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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 715.

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Length: 21 pages
Date of creation: 21 Aug 2007
Date of revision:
Publication status: Published in Handbook of Social Capital, Svendsen, Gert, Svendsen, Gunnar (eds.), 2009, chapter 19, Edward Elgar.
Handle: RePEc:hhs:iuiwop:0715

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
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Related research

Keywords: Trust; Inequality; Social Capital; Social Ties; Networks;

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References

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  1. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  2. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  3. Berggren, Niclas & Jordahl, Henrik, 2005. "Free to Trust? Economic Freedom and Social Capital," Ratio Working Papers 64, The Ratio Institute.
  4. Anthony B. Atkinson & Andrea Brandolini, 2000. "Promise and Pitfalls in the Use of 'Secondary' Data-Sets: Income Inequality in OECD Countries," Temi di discussione (Economic working papers) 379, Bank of Italy, Economic Research and International Relations Area.
  5. Christian Bjørnskov, 2007. "Determinants of generalized trust: A cross-country comparison," Public Choice, Springer, vol. 130(1), pages 1-21, January.
  6. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  7. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
  8. Stephen Leider & Markus M. Möbius & Tanya Rosenblat & Quoc-Anh Do, 2007. "Directed Altruism and Enforced Reciprocity in Social Networks: How Much is A Friend Worth?," NBER Working Papers 13135, National Bureau of Economic Research, Inc.
  9. 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.
  10. Leigh, Andrew, 2006. "Does equality lead to fraternity?," Economics Letters, Elsevier, vol. 93(1), pages 121-125, October.
  11. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  12. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, 09.
  13. Dean Karlan & Markus Mobius & Tanya Rosenblat & Adam Szeidl, 2009. "Trust and Social Collateral," The Quarterly Journal of Economics, MIT Press, vol. 124(3), pages 1307-1361, August.
  14. Alberto Alesina & Eliana La Ferrara, . "Participation in Heterogeneous Communities," Working Papers 151, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  15. Johansson-Stenman, Olof, 2006. "Who Are the Trustworthy, We Think?," Working Papers in Economics 222, University of Gothenburg, Department of Economics.
  16. Hilde Coffé & Benny Geys, 2006. "Community Heterogeneity: A Burden for the Creation of Social Capital?," Social Science Quarterly, Southwestern Social Science Association, vol. 87(5), pages 1053-1072.
  17. Morgan Kelly, 2000. "Inequality And Crime," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 530-539, November.
  18. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  19. repec:ebl:ecbull:v:26:y:2006:i:4:p:1-20 is not listed on IDEAS
  20. Justina A.V. Fischer & Benno Torgler, 2006. "The Effect of Relative Income Position on Social Capital," Economics Bulletin, AccessEcon, vol. 26(4), pages 1-20.
  21. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  22. Niclas Berggren & Mikael Elinder & Henrik Jordahl, 2008. "Trust and growth: a shaky relationship," Empirical Economics, Springer, vol. 35(2), pages 251-274, September.
  23. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  24. Lisa Anderson & Jennifer Mellor & Jeffrey Milyo, 2006. "Induced heterogeneity in trust experiments," Experimental Economics, Springer, vol. 9(3), pages 223-235, September.
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Citations

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Cited by:
  1. Justina AV Fischer & Benno Torgler, 2007. "Social Capital And Relative Income Concerns: Evidence From 26 Countries," NCER Working Paper Series 19, National Centre for Econometric Research.
  2. 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, Springer, vol. 113(3), pages 1009-1023, September.
  3. 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, 04.
  4. 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.
  5. Eric Kemp-Benedict, 2013. "Inequality and Trust: Testing a Mediating Relationship for Environmental Sustainability," Sustainability, MDPI, Open Access Journal, vol. 5(2), pages 779-788, February.
  6. Fischer, Justina AV, 2008. "The Welfare Effects of Social Mobility," MPRA Paper 16339, University Library of Munich, Germany, revised Jun 2009.
  7. 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.
  8. Yamamura, Eiji, 2012. "Effect of social capital on income redistribution preferences: comparison of neighborhood externality between high- and low-income households," MPRA Paper 36181, University Library of Munich, Germany.
  9. Fischer, Justina AV, 2009. "The Welfare Effects of Social Mobility: An Analysis for OECD countries," MPRA Paper 17070, University Library of Munich, Germany.
  10. Fischer, Justina A.V., 2012. "Globalization and social networks," MPRA Paper 40404, University Library of Munich, Germany.

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