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Inequality and Trust

Published as "Economic inequality" in Svendsen, G. T. and Svendsen, G. L. H. (eds.), Handbook of Social Capital, Edward Elgar, 2009

IFN Working Paper No. 715

22 Pages Posted: 10 Sep 2007 Last revised: 2 Feb 2017

Henrik Jordahl

Research Institute of Industrial Economics (IFN); CESifo (Center for Economic Studies and Ifo Institute); IZA

Date Written: August 21, 2007

Abstract

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.

Keywords: Trust, Inequality, Social Capital, Social Ties, Networks

JEL Classification: C23, D31, Z13

Suggested Citation

Jordahl, Henrik, Inequality and Trust (August 21, 2007). Published as "Economic inequality" in Svendsen, G. T. and Svendsen, G. L. H. (eds.), Handbook of Social Capital, Edward Elgar, 2009; IFN Working Paper No. 715. Available at SSRN: https://ssrn.com/abstract=1012786 or http://dx.doi.org/10.2139/ssrn.1012786

Henrik Jordahl (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/hj

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

IZA ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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