Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 673: Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others

Magnus Gustavsson () and Henrik Jordahl ()
Additional contact information
Magnus Gustavsson: Uppsala University, Postal: P.O. Box 513, SE-751 20 Uppsala, Sweden
Henrik Jordahl: Research Institute of Industrial Economics (IFN), Postal: Box 55665, SE-102 15 Stockholm, Sweden

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-codes: C23; D31; Z13

32 pages, November 14, 2006

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