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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
Contact details of provider: Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
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  1. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053.
  2. 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).
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  4. 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.
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  7. Edin, P.-A. & Fredriksson, P., 2000. "LINDA - Longitudinal INdividual DAta for Sweden," Papers 2000:19, Uppsala - Working Paper Series.
  8. T. Knaap, 2005. "Trade, location, and wages in the United States," Working Papers 05-30, Utrecht School of Economics.
  9. Alesina, Alberto F & La Ferrara, Eliana, 2000. "Who Trusts Others?," CEPR Discussion Papers 2646, C.E.P.R. Discussion Papers.
  10. repec:tpr:qjecon:v:115:y:2000:i:3:p:811-846 is not listed on IDEAS
  11. La Ferrara, Eliana, 2002. "Inequality and group participation: theory and evidence from rural Tanzania," Journal of Public Economics, Elsevier, vol. 85(2), pages 235-273, August.
  12. Andrew Leigh, 2006. "Trust, Inequality, and Ethnic Heterogeneity," CEPR Discussion Papers 511, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. repec:bla:restud:v:47:y:1980:i:1:p:225-38 is not listed on IDEAS
  14. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  15. 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.
  16. 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.
  17. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  18. Pierre Cahuc & Stéphane Carcillo & André Zylberberg, 2014. "Labor Economics," Sciences Po publications info:hdl:2441/1oclgdahv98, Sciences Po.
  19. Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  20. 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).
  21. repec:tpr:qjecon:v:112:y:1997:i:4:p:1251-88 is not listed on IDEAS
  22. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
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