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Inequality and Trust

Henrik Jordahl

Research Institute of Industrial Economics (IFN); 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

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Date posted: September 10, 2007 ; Last revised: October 14, 2007

Suggested Citation

Jordahl, Henrik, Inequality and Trust (August 21, 2007). IFN Working Paper No. 715. Available at SSRN: http://ssrn.com/abstract=1012786 or http://dx.doi.org/10.2139/ssrn.1012786

Contact Information

Henrik Jordahl (Contact Author)
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
HOME PAGE: http://www.ifn.se/hj
IZA ( email )
P.O. Box 7240
Bonn, D-53072
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