Inequality and Trust: Some Inequalities are More Harmful than Others

33 Pages Posted: 2 Oct 2006 Last revised: 2 Feb 2017

See all articles by Magnus J. Gustavsson

Magnus J. Gustavsson

Uppsala University - Department of Economics

Henrik Jordahl

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

Date Written: January 17, 2006

Abstract

We present new evidence on the influence of income inequality on generalized trust. Using individual panel data from Swedish counties together with an instrumental variable strategy we find that differences in disposable income, and especially differences among people in the bottom half of the income distribution, are associated with lower trust. The relationship between income inequality and trust is particularly strong for people with a strong aversion against income differentials. We also find that the proportion of people born in a foreign country is negatively associated with trust.

Keywords: trust, social capital, inequality

JEL Classification: C23, D31, Z13

Suggested Citation

Gustavsson, Magnus J. and Jordahl, Henrik, Inequality and Trust: Some Inequalities are More Harmful than Others (January 17, 2006). Published as "Inequality and trust in Sweden: Some inequalities are more harmful than others", Journal of Public Economics, 92 (1-2), 348-365, 2008; Uppsala University Economics Working Paper No. 2006:3. Available at SSRN: https://ssrn.com/abstract=933978 or http://dx.doi.org/10.2139/ssrn.933978

Magnus J. Gustavsson

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

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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