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In-Group versus Out-Group Trust: The Impact of Income Inequality

Author

Listed:
  • Vivian Lei

    () (Department of Economics, University of Wisconsin-Milwaukee, 3210 N. Maryland Avenue, Bolton Hall 818, Milwaukee, WI 53201, USA, and Department of Economics and Finance, City University of Hong Kong, Hong Kong;)

  • Filip Vesely

    () (Department of Economics, University of Wisconsin-Milwaukee, 3210 N. Maryland Avenue, Bolton Hall 812, Milwaukee, WI 53201, USA, and Department of Economics, Hong Kong University of Science and Technology, Hong Kong.)

Abstract

In this article, we adopt a variant of the trust game by Berg, Dickhaut, and McCabe (1995) and the dictator game by Cox (2004) to determine if income inequality can activate in-group favoritism and, if so, whether such a bias is strong enough to survive the removal of income inequality. We find evidence of in-group favoritism only on the part of rich first movers. Rich first movers trust their in-group members significantly more in the presence of income inequality not only before but also after they gain enough experience. Poor first movers, in contrast, do not exhibit such in-group bias. They do not discriminate between in-group and out-group at the very outset of the experiment, and once they become experienced, they behave with significantly more trust toward the rich than toward the poor. We also find that in-group and out-group favoritism established in the past can be alleviated, but not completely removed, by an equal income distribution.

Suggested Citation

  • Vivian Lei & Filip Vesely, 2010. "In-Group versus Out-Group Trust: The Impact of Income Inequality," Southern Economic Journal, Southern Economic Association, vol. 76(4), pages 1049-1063, April.
  • Handle: RePEc:sej:ancoec:v:76:4:y:2010:p:1049-1063
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    File URL: http://dx.doi.org/10.4284/sej.2010.76.4.1049
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    Citations

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    Cited by:

    1. Kingsley, David C., 2016. "Endowment heterogeneity and peer punishment in a public good experiment: Cooperation and normative conflict," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 60(C), pages 49-61.
    2. Rémi Suchon & Marie Claire Villeval, 2017. "Does upward mobility harm trust?," Post-Print halshs-01659021, HAL.
    3. Delavande, Adeline & Zafar, Basit, 2015. "Stereotypes and Madrassas: Experimental evidence from Pakistan," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 247-267.
    4. repec:eee:streco:v:44:y:2018:i:c:p:55-67 is not listed on IDEAS
    5. Bogliacino, Francesco & Grimalda, Gianluca & Jimenez, Laura, 2017. "Consultative Democracy & Trust," MPRA Paper 82138, University Library of Munich, Germany.
    6. Costard, Jano & Bolle, Friedel, 2011. "Solidarity, responsibility and group identity," Discussion Papers 309, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    7. Rémi Suchon & Marie Claire Villeval, 2018. "Does upward mobility harm trust?," Working Papers halshs-01687271, HAL.
    8. Adeline Delavande & Basit Zafar, 2011. "Stereotypes and Madrassas Experimental Evidence from Pakistan," Working Papers WR-859, RAND Corporation.
    9. Shaun Hargreaves Heap & Jonathan Tan & Daniel Zizzo, 2013. "Trust, inequality and the market," Theory and Decision, Springer, vol. 74(3), pages 311-333, March.
    10. Bryan C. McCannon & Colleen Tokar Asaad & Mark Wilson, 2015. "Contracts and Trust," Working Papers 15-15, Department of Economics, West Virginia University.

    More about this item

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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