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The Giver as a General in Her Fortunes. Experimental Evidence on Trust, Inequality and Growth (or Decline)

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Abstract

We report the results of a laboratory experiment based on the trust game and designed to assess the impact of economic growth and inequality on trust in a unified framework. Compared to a control with no inequality, we implement three treatments with exogenously induced inequality in environments characterized by growing, stable or falling initial average endowments. We find that trust and trustworthiness both decrease with inequality, and trust (but not trustworthiness) increases with an increase in the average endowment level. Hence, the negative impact of inequality on trust results to be stronger in the environment with falling average endowment, whereas no effect is recorded in the environment with growing average endowment. These aggregate effects are driven by the significant negative reactions to inequality by those who, due to treatment, end up at the bottom of the endowment distribution. Classification-C91, D31, D90

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  • Marcello D'Amato & Niall O’Higgins & Marco Stimolo, 2019. "The Giver as a General in Her Fortunes. Experimental Evidence on Trust, Inequality and Growth (or Decline)," CSEF Working Papers 543, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:543
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    Keywords

    Trust Game; Inequality; Growth; Decline;
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