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GINI DP 20: Does Income Inequality Negatively Affect General Trust? Examining three potential problems with the inequality-trust hypothesis

  • Sander Steijn

    ()

    (AISSR, University of Amsterdam)

  • Bram Lancee

    ()

    (Research unit Migration, Integration, Transnationalization, Social Science Research Center Berlin (WZB))

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    Many studies on the consequences of income inequality find that where inequality is high, trust is low. There are, however, reasons to examine the relation between inequality and trust more closely. First, previous research does not differentiate between the effect of income inequality and that of national wealth. Furthermore, the underlying mechanism is often unclear. Finally, the association might be dependent on non-Western countries where income inequality is extremely high. In this paper, we evaluate whether there is a relation between income inequality and trust in a sample of Western developed economies when taking into account national wealth. Theoretically, we distinguish between stratification effects and perception effects of inequality. Empirically, besides actual income inequality and national wealth, we include a measurement of perceived inequality on the basis of individual level earnings estimations for stereotypical jobs. We find no significant effect of inequality on trust when taking into account national wealth, suggesting that in Western countries the amount of resources rather than its distribution explains trust. Key words: trust, income inequality, perceived inequality, national wealth, comparative research.

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    Paper provided by AIAS, Amsterdam Institute for Advanced Labour Studies in its series GINI Discussion Papers with number 20.

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    Date of creation: Nov 2011
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    Handle: RePEc:aia:ginidp:20
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    1. 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.
    2. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
    3. Alberto Alesina & Eliana La Ferrara, 2000. "Participation In Heterogeneous Communities," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 847-904, August.
    4. Delhey, Jan & Newton, Kenneth, 2002. "Who trusts? The origins of social trust in seven nations," Discussion Papers, Research Unit: Social Structure and Social Reporting FS III 02-402, Social Science Research Center Berlin (WZB).
    5. Jordahl, Henrik, 2007. "Inequality and Trust," Working Paper Series 715, Research Institute of Industrial Economics.
    6. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust: Some Inequalities are More Harmful than Others," Working Paper Series 2006:3, Uppsala University, Department of Economics.
    7. Natalia Letki, 2008. "Does Diversity Erode Social Cohesion? Social Capital and Race in British Neighbourhoods," Political Studies, Political Studies Association, vol. 56, pages 99-126, 03.
    8. Andrew Leigh, 2006. "Trust, Inequality, and Ethnic Heterogeneity," CEPR Discussion Papers 511, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    9. Brown, Malcolm C., 1994. "Using gini-style indices to evaluate the spatial patterns of health practitioners: Theoretical considerations and an application based on Alberta data," Social Science & Medicine, Elsevier, vol. 38(9), pages 1243-1256, May.
    10. Delhey, Jan & Newton, Kenneth, 2004. "Social trust: Global pattern or nordic exceptionalism?," Discussion Papers, Research Unit: Inequality and Social Integration SP I 2004-202, Social Science Research Center Berlin (WZB).
    11. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
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