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Inequality, Fairness and Social Capital

Author

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  • Fehr, Dietmar
  • Rau, Hannes
  • Trautmann, Stefan T.

    (Tilburg University, Center For Economic Research)

  • Xu, Yilong

    (Tilburg University, Center For Economic Research)

Abstract

Inequality is often associated with negative societal consequences, but identifying a causal relationship is a daunting task. We provide evidence on the impact of unjust economic inequality on social interactions. Using a large-scale controlled experiment, we document that unjust inequality results in a significant decline in trust and trustworthiness. This erosion of social capital is associated with pessimistic beliefs about others’ behavior and is muted if there is no direct link between the income-generating process and social interaction. Finally, our data do not support the view that higher status or wealth affects pro-social attitudes: the successful are always more generous, whereas unsuccessful persons display the least efficient and generous behavior regardless of the status of the person who they interact with.
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Suggested Citation

  • Fehr, Dietmar & Rau, Hannes & Trautmann, Stefan T. & Xu, Yilong, 2018. "Inequality, Fairness and Social Capital," Discussion Paper 2018-023, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:5aa2c210-4a6c-49b0-955b-713611d02043
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    7. Lobeck, Max & Morten.Stostad@nhh.no, Morten Nyborg, 2023. "The Consequences of Inequality: Beliefs and Redistributive Preferences," Discussion Paper Series in Economics 17/2023, Norwegian School of Economics, Department of Economics.
    8. Max Lobeck & Morten Nyborg Støstad, 2023. "The Consequences of Inequality: Beliefs and Redistributive Preferences," CESifo Working Paper Series 10710, CESifo.
    9. Cardella, Eric & Roomets, Alex, 2022. "Pay distribution preferences and productivity effects: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
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    More about this item

    Keywords

    inequality; fairness; social capital;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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