Who are Your Joneses? Socio-Specific Income Inequality and Trust

Fabian Stephany

Trust is a good approach to explain the functioning of markets, institutions or society as a whole. It is a key element in almost every commercial transaction over time and might be one of the main explanations of economic success and development. Trust diminishes the more we perceive others to have economically different living realities. In most of the relevant contributions, scholars have taken a macro perspective on the inequality-trust linkage, with an aggregation of both trust and inequality on a country level. However, patterns of within-country inequality and possibly influential determinants, such as perception and socioeconomic reference, remained undetected. This paper offers the opportunity to look at the interplay between inequality and trust at a more refined level. A measure of (generalized) trust emerges from ESS 5 survey which asks "...generally speaking, would you say that most people can be trusted, or that you can't be too careful in dealing with people?". With the use of 2009 EU-SILC data, measurements of income inequality are developed for age-specific groups of society in 22 countries. A sizable variation in inequality measures can be noticed. Even in low inequality countries, like Sweden, income imbalances within certain age groups have the potential to undermine social trust.