Trust, Racial Fragmentation and Income Inequality: New Evidence from the U.S.

39 Pages Posted: 16 Apr 2014

See all articles by Andrea Tesei

Andrea Tesei

Queen Mary University of London - School of Economics and Finance

Date Written: March 16, 2014

Abstract

Existing studies of trust formation in U.S. metropolitan areas have found that trust is lower when there is more income inequality and greater racial fragmentation. I add to this literature by examining the role of income inequality between racial groups (racial income inequality). I find that greater racial income inequality reduces trust. Also, racial fragmentation is no longer a significant determinant of trust once racial income inequality is accounted for. This result is consistent with a simple conceptual framework where concurrent differences in race and income are especially detrimental for trust formation. I find empirical support for further implications deriving from this assumption. In particular, I show that racial income inequality has a more detrimental effect in more racially fragmented communities and that trust falls more in minority groups than in the majority group when racial income inequality increases.

JEL Classification: H730, I310, J150

Suggested Citation

Tesei, Andrea, Trust, Racial Fragmentation and Income Inequality: New Evidence from the U.S. (March 16, 2014). CESifo Working Paper Series No. 4718, Available at SSRN: https://ssrn.com/abstract=2425582 or http://dx.doi.org/10.2139/ssrn.2425582

Andrea Tesei (Contact Author)

Queen Mary University of London - School of Economics and Finance ( email )

Lincoln's Inn Fields
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London, E1 4NS
United Kingdom

HOME PAGE: http://andreatesei.com

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