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An Experimental Study of the Effects of Inequality and Relative Deprivation on Trusting Behavior

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Several non-experimental studies report that income inequality and other forms of population-based heterogeneity reduce levels of trust in society. However, recent work by Glaeser et al. (2000) calls into question the reliability of widely used survey-based measures of trust. Specifically, survey responses regarding trust attitudes did not reflect subjects actual behavior in a trust game. In this paper, we conduct a novel experimental test of the effects of inequality on trust and trustworthiness. Our experimental design induces inequality by varying the show-up fees paid to subjects, in contrast to previous experiments that focus on broad cultural or national differences in trust. We do not find robust support for the hypothesis that inequality per se dampens trusting behavior among all subjects; however, we do find some evidence that trust and rustworthiness are influenced by an individuals relative position in the group. Finally, we confirm previous findings that common survey-based measures of social trust are not associated with actual trusting behavior.

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File URL: https://economics.missouri.edu/working-papers/2005/wp0502_milyo.pdf
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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 0502.

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Date of creation: 12 Jan 2005
Handle: RePEc:umc:wpaper:0502
Note: Length: 35 pgs.
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  1. Chaim Fershtman & Uri Gneezy, 2001. "Discrimination in a Segmented Society: An Experimental Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 351-377.
  2. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, 09.
  3. 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.
  4. Anderhub, Vital & Engelmann, Dirk & Guth, Werner, 2002. "An experimental study of the repeated trust game with incomplete information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 197-216, June.
  5. Bellemare, Charles & Kroger, Sabine, 2007. "On representative social capital," European Economic Review, Elsevier, vol. 51(1), pages 183-202, January.
  6. Knack, Stephen, 2003. "Groups, Growth and Trust: Cross-Country Evidence on the Olson and Putnam Hypotheses," Public Choice, Springer, vol. 117(3-4), pages 341-355, December.
  7. Angus Deaton, 2001. "Relative Deprivation, Inequality, and Mortality," NBER Working Papers 8099, National Bureau of Economic Research, Inc.
  8. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
  9. Danielson, Anders J. & Holm, Hakan J., 2007. "Do you trust your brethren?: Eliciting trust attitudes and trust behavior in a Tanzanian congregation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 255-271, February.
  10. repec:pri:cheawb:deaton_relative_deprivation is not listed on IDEAS
  11. Cochard, Francois & Nguyen Van, Phu & Willinger, Marc, 2004. "Trusting behavior in a repeated investment game," Journal of Economic Behavior & Organization, Elsevier, vol. 55(1), pages 31-44, September.
  12. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
  13. Bouckaert, Jan & Dhaene, Geert, 2004. "Inter-ethnic trust and reciprocity: results of an experiment with small businessmen," European Journal of Political Economy, Elsevier, vol. 20(4), pages 869-886, November.
  14. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & J�rgen Schupp & Gert G. Wagner, "undated". "A Nation-Wide Laboratory: Examining trust and trustworthiness by integrating behavioral experiments into representative surveys," IEW - Working Papers 141, Institute for Empirical Research in Economics - University of Zurich.
  15. BOUCKAERT, Jan & DHAENE, Geert, 2002. "Inter-ethnic trust and reciprocity: Results of an experiment with small business entrepreneurs," Working Papers 2002022, University of Antwerp, Faculty of Applied Economics.
  16. repec:pri:cheawb:deaton_relative_deprivation.pdf is not listed on IDEAS
  17. Nancy Buchan & Rachel Croson, 1999. "Gender and Culture: International Experimental Evidence from Trust Games," American Economic Review, American Economic Association, vol. 89(2), pages 386-391, May.
  18. Sheryl Ball & Catherine Eckel & Philip J. Grossman & William Zame, 2001. "Status in Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 161-188.
  19. Edward L. Glaeser & David I. Laibson & José A. Scheinkman & Christine L. Soutter, 2000. "Measuring Trust," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 811-846.
    • Glaeser, Edward Ludwig & Laibson, David I. & Scheinkman, Jose A. & Soutter, Christine L., 2000. "Measuring Trust," Scholarly Articles 4481497, Harvard University Department of Economics.
  20. Burks, Stephen V. & Carpenter, Jeffrey P. & Verhoogen, Eric, 2003. "Playing both roles in the trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 51(2), pages 195-216, June.
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  23. Buchan, Nancy & Croson, Rachel, 2004. "The boundaries of trust: own and others' actions in the US and China," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 485-504, December.
  24. Gachter, Simon & Herrmann, Benedikt & Thoni, Christian, 2004. "Trust, voluntary cooperation, and socio-economic background: survey and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 505-531, December.
  25. Roth, Alvin E. & Vesna Prasnikar & Masahiro Okuno-Fujiwara & Shmuel Zamir, 1991. "Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh, and Tokyo: An Experimental Study," American Economic Review, American Economic Association, vol. 81(5), pages 1068-1095, December.
  26. Engle-Warnick, Jim & Slonim, Robert L., 2004. "The evolution of strategies in a repeated trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 553-573, December.
  27. Bellemare, Charles & Kröger, Sabine, 2003. "On Representative Trust," SFB 373 Discussion Papers 2003,27, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  28. repec:hrv:faseco:30747160 is not listed on IDEAS
  29. Fahr, Rene & Irlenbusch, Bernd, 2000. "Fairness as a constraint on trust in reciprocity: earned property rights in a reciprocal exchange experiment," Economics Letters, Elsevier, vol. 66(3), pages 275-282, March.
  30. Abigail Barr, 2003. "Trust and expected trustworthiness: experimental evidence from zimbabwean villages," Economic Journal, Royal Economic Society, vol. 113(489), pages 614-630, 07.
  31. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
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