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A cross-country analysis of the relationship between income inequality and social capital

  • Heijke J.A.M.
  • Ioakimidis M.

    (ROA)

This study investigated whether earnings inequality is associated with social capital as measured by active membership in organizations and interpersonal trust. Pearson product-moment correlation analysis showed that greater earnings inequality was associated with lower values on both measures of social capital in 14 European countries. While causality in either direction cannot be inferred from this result, it does suggest the possibility that earnings inequality negatively affects social capital. To test this idea further, we also tentatively examined whether other societal indicators related to earnings inequality are associated with social capital. These alternative indicatorsthe countrys percentage of urban residents, percentage of residents with tertiary education, and government spending as a percentage of GDPdid not show stronger relationships with social capital than did earnings inequality. Further analysis of the data by excluding specific groups of countries indicated little association between earnings inequality and measures of social capital. These results suggested that country-specific economic or cultural values play a large role in how earnings inequality and social capital are related.

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Paper provided by Maastricht University, Research Centre for Education and the Labour Market (ROA) in its series ROA Technical Report with number 003.

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Date of creation: 2013
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Handle: RePEc:unm:umarot:2013003
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