Abstract
Literature has argued that income inequality crowds out trust. However, whether income inequality makes people less trusting depends on how they perceive income inequality within their personal social context and social cognition. In this paper we therefore conjecture that the relationship of income inequality to trust depends on how income inequality affects inequality of life satisfaction. If life satisfaction inequality is high, distrust is generated among the least happy. This will increase polarization and the risk of rebellion, thereby also affecting trust among the happier people. Thus, life satisfaction inequality may be an essential factor in the relationship between income inequality and trust. In previous literature, the potential mediating role of life satisfaction inequality in the relationship between income inequality and social trust has not yet received attention. We test our model by panel analysis on 25 OECD countries in the period 1990–2014. The panel analysis shows that income inequality increases life satisfaction inequality and that both income inequality and life satisfaction inequality have a significant negative impact on social trust. Mediation tests show complementary mediation: besides the direct negative effect of income inequality on trust, we find an indirect effect mediated by life satisfaction inequality. This indirect effect counts for 20% of the total effect of income inequality on trust. Our results imply that policy options for increasing trust are not limited to countering income inequality, but can also include policy measures that directly reduce inequality of life satisfaction.
Highlights
In recent years, research interest has increasingly shifted to the role of income inequality as a determinant of well-being
Our principal research question is as follows: How does life satisfaction inequality affect social trust, and to what extent does life satisfaction inequality mediate the relationship between income inequality and social trust? In order to answer our principal question, we look at two sub questions
We have investigated the relationship between income inequality, life satisfaction inequality, and trust
Summary
Research interest has increasingly shifted to the role of income inequality as a determinant of well-being. While the link between income inequality and inequality in life satisfaction has had some attention in literature (Ott 2005; Ovaska and Takashima 2010; Delhey and Kohler 2011; Becchetti et al 2013), the influence of life satisfaction inequality on social trust—and the potential mediating role of this type of inequality in the relationship between income inequality and social trust—has not so far been researched. It is the subject of investigation in this paper.
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