2014

Trust, Welfare States and Income Equality: Sorting out the Causality

Reprint No. 2014:43

Author(s): Andreas Bergh and Christian BjørnskovYear: 2014 Title: European Journal of Political Economy Volume (No.): 35 (September) Pages: 183–199
Online article (restrictions may apply)
Preliminary version


The cross-country correlation between social trust and income equality is well documented, but few studies examine the direction of causality. We show theoretically that by facilitating cooperation, trust may lead to more equal outcomes, while the feedback from inequality to trust is ambiguous. Using a structural equation model estimated on a large country sample, we find that trust has a positive effect on both market and net income equality. Larger welfare states lead to higher net equality but neither net income equality nor welfare state size seems to have a causal effect on trust. We conclude that while trust facilitates welfare state policies that may reduce net inequality, this decrease in inequality does not increase trust.


Reference:
Bergh, Andreas and Christian Bjørnskov (2014), "Trust, Welfare States and Income Equality: Sorting out the Causality". European Journal of Political Economy 35(September), 183–199.

Andreas Bergh

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Mob: 070 779 0734
andreas.bergh@ifn.se

Christian Bjørnskov

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Ph: +45 87 16 48 19
Mob: +45 20 12 03 84
chbj@econ.au.dk

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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