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Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others

We present new evidence on the influence of income inequality on generalized trust. Using individual panel data from Swedish counties together with an instrumental variable strategy, we find that differences in disposable income, and especially differences among people in the bottom half of the income distribution, are associated with lower trust. The relationship between income inequality and trust is particularly strong for people with a strong aversion against income differentials. We also find that the proportion of people born in a foreign country is negatively associated with trust.

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Paper provided by The Ratio Institute in its series Ratio Working Papers with number 106.

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Length: 32 pages
Date of creation: 18 Oct 2006
Date of revision:
Publication status: Published in Journal of Public Economics, 2008, pages 348-365.
Handle: RePEc:hhs:ratioi:0106
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The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Phone: 08-441 59 00
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  1. Carlsson, Mikael & Eriksson, Stefan & Gottfries, Nils, 2006. "Testing Theories of Job Creation: Does Supply Create Its Own Demand?," Working Paper Series 194, Sveriges Riksbank (Central Bank of Sweden).
  2. Ada Ferrer-i-Carbonell & Paul Frijters, 2002. "How important is Methodology for the Estimates of the Determinants of Happiness?," Tinbergen Institute Discussion Papers 02-024/3, Tinbergen Institute.
  3. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  4. Knaap, Thijs, 2006. "Trade, location, and wages in the United States," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 595-612, September.
  5. Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
  6. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1251-1288.
  7. Andrew Leigh, 2006. "Trust, Inequality, and Ethnic Heterogeneity," CEPR Discussion Papers 511, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  8. 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).
  9. Alberto Alesina & Eliana La Ferrara, . "Participation in Heterogeneous Communities," Working Papers 151, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  10. Eliana La Ferrara, 2000. "Inequality and Group Participation: Theory and Evidence from Rural Tanzania," Development Working Papers 138, Centro Studi Luca d'Agliano, University of Milano.
  11. repec:dau:papers:123456789/10091 is not listed on IDEAS
  12. Edin, Per-Anders & Fredriksson, Peter, 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Working Paper Series 2000:19, Uppsala University, Department of Economics.
  13. Hamermesh, Daniel S., 1999. "The Changing Distribution of Job Satisfaction," IZA Discussion Papers 42, Institute for the Study of Labor (IZA).
  14. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, March.
  15. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  16. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
  17. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
  18. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  19. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
  20. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
  21. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
  22. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  23. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, November.
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