The Dynamic Interplay of Inequality and Trust – An Experimental Study

Greiner, Ben / Ockenfels, Axel / Werner, Peter
Authors registered in the RePEc Author Service: Ben Greiner (), Peter Werner and Axel Ockenfels

No CESifo Working Paper No. 2173, CESifo Working Paper Series from CESifo GmbH

Abstract: We study the interplay of inequality and trust in a dynamic game, in which trust increases efficiency and thus allows higher growth of the experimental economy in the future. We find that trust is initially high in a treatment starting with equal endowments, but decreases over time. In a treatment with unequal endowments, trust is initially lower yet remains relatively stable. The difference seems partly due to the fact that equal starting positions increase subjects’ inclination to condition their trust decisions on wealth comparisons, whereas conditional trust is much less prevalent with unequal initial endowments. As a result, with respect to efficiency, the initially more unequal economy fares worse in the short run but better in the long run, and the disparity of wealth distributions across economies mitigates over time.

Keywords: inequality; trust; growth; laboratory experiments (search for similar items in EconPapers)
Date: Written 2007
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Related works:
Working Paper: The Dynamic Interplay of Inequality and Trust - An Experimental Study (2007)
Working Paper: The Dynamic Interplay of Inequality and Trust - An Experimental Study (2007)
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