Inequality and Trust
Research Institute of Industrial Economics (IFN); CESifo (Center for Economic Studies and Ifo Institute); IZA
August 21, 2007
IFN Working Paper No. 715
This paper reviews the literature on economic inequality and trust. Cross-country studies, within-country studies, and experiments all suggest that economic inequality exerts a negative influence on trust. Four mechanisms are proposed to explain the negative relationship: social ties (or networks), inference on social relationships (to see inequality as a signal of untrustworthy behavior), conflicts over resources, and opportunity cost of time. Social ties receive the strongest empirical support, but there is also some evidence in favor of inference on social relationships. Conflicts over resources and opportunity cost of time are contradicted by important pieces of evidence.
Number of Pages in PDF File: 22
Keywords: Trust, Inequality, Social Capital, Social Ties, Networks
JEL Classification: C23, D31, Z13
Date posted: September 10, 2007 ; Last revised: October 14, 2007
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