Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2006:3: Inequality and Trust: Some Inequalities are More Harmful than Others

Magnus Gustavsson () and Henrik Jordahl
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Magnus Gustavsson: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Henrik Jordahl: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, 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

29 pages, January 17, 2006

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Published as
Magnus Gustavsson and Henrik Jordahl, (2008), 'Inequality and Trust in Sweden', Journal of Public Economics, vol 92, pages 348-365

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