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On inequality, growth and trust: some evidence from the lab

Published online by Cambridge University Press:  21 July 2021

Marcello D'Amato ,
Niall O'Higgins  and
Marco Stimolo
Marcello D'Amato
Affiliation:
Department of Law, Università di Napoli, Suor Orsola Benincasa; CSEF, Università di Napoli Federico II, Naples, Italy Celpe, Università di Salerno, Fisciano, Italy
Niall O'Higgins
Affiliation:
Employment Policy Department, International Labour Organization (ILO), CH-1211 Geneva, Switzerland Department of Economics and Statistics, Università di Salerno, 84084 Fisciano, Italy
Marco Stimolo*
Affiliation:
Department of Economics, Università della Campania, Luigi Vanvitelli, 81043 Capua, CE, Italy
*
*Corresponding author. Email: marco.stimolo@unicampania.it
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Abstract

In a novel experimental design, we investigate the impact of exogenous variation in economic growth and inequality on trusting behaviour. In addition to a control with uniform endowment, three treatments were implemented where the initial endowment is exogenously changed to produce inequality and three growth scenarios where average endowments increase (boom), decrease (recession) or remain unaltered (steady state). We find that aggregate trust and trustworthiness both decrease due to the induced heterogeneity in endowments. Also, trust (but not trustworthiness) decreases (increases) due to recessions (booms). The impact of inequality on trust is greatest in a recession and absent in a boom. These aggregate effects are driven mainly by the reactions of those who, after treatment, end up at the bottom of the endowment distribution. These findings are close in sign and in the order of magnitude to those reported in observational studies on the relationship between growth, inequality and trust.

Keywords

Generalized trustgrowthinequalityrecessionC91D31D90
Type
Research Article
Information
Journal of Institutional Economics , Volume 18 , Issue 4 , August 2022 , pp. 621 - 636
Copyright
Copyright © The Author(s), 2021. Published by Cambridge University Press on behalf of Millennium Economics Ltd.

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