Inequality, perception biases and trust

Markus Knell and Helmut Stix

The Journal of Economic Inequality, 2021, vol. 19, issue 4, No 10, 824 pages

Abstract: Abstract This paper studies the effect of income (wealth) inequality on interpersonal trust. We propose a theoretical framework that links trust, trustworthiness and inequality. The key feature is that agents do not necessarily observe the entire income distribution but base their assessment on reference groups (i.e. they might hold a biased view of reality). In this framework the negative impact of inequality on interpersonal trust is related to the individual-specific perception of inequality. This has important implications for the empirical analyses since researchers typically do not observe perceptions but only objective measures of inequality (e.g. the Gini coefficient). We show that the use of the latter is appropriate only under restrictive assumptions and in general will result in an underestimation of the true effect. An unbiased estimate of the effect of inequality on trust can be obtained with a measure of individual-specific perceptions of inequality. Survey data support our framework. Perceptions of higher inequality exert a strong negative effect on trust.

Keywords: Trust; Inequality; Perception (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10888-021-09490-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Inequality, Perception Biases and Trust (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecin:v:19:y:2021:i:4:d:10.1007_s10888-021-09490-x

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10888

DOI: 10.1007/s10888-021-09490-x

Access Statistics for this article

The Journal of Economic Inequality is currently edited by Stephen Jenkins

More articles in The Journal of Economic Inequality from Springer, Society for the Study of Economic Inequality Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().