Handbook of Social Capital

Handbook of Social Capital

The Troika of Sociology, Political Science and Economics

Elgar original reference

Edited by Gert Tingaard Svendsen and Gunnar Lind Haase Svendsen

The Handbook of Social Capital offers an important contribution to the study of bonding and bridging social capital networks, balancing the ‘troika’ of sociology, political science and economics. Eminent contributors, including Nobel Prize winner Elinor Ostrom, explore the different scientific approaches required if international research is to embrace both the bright and the more shadowy aspects of social capital. The Handbook stresses the importance of trust for economies all over the world and contains a strong advocacy for cross-disciplinary work within the social sciences.

Chapter 19: Economic Inequality

Henrik Jordahl

Subjects: business and management, organisation studies, social policy and sociology, sociology and sociological theory


1 Henrik Jordahl 19.1 Introduction Inequality is a strong determinant of trust.2 People in unequal societies trust each other to a much smaller extent than people do in more equal communities. Several economic and social mechanisms could explain this relationship. Political factors could also be important; political arguments and decisions are often influenced by notions of distributive justice. People’s aversion to inequality has also been demonstrated in more systematic studies, for example by Fehr and Schmidt (1999). The development of income inequality and trust in the US illustrates the negative relationship. Since about 1975 there has been a significant increase in income inequality (Piketty and Saez, 2003), and as observed by Putnam (2000) trust has declined during the same period. The coincidence of high trust and low income inequality in the Nordic countries provides an alternative illustration. There are good reasons to care about this. A major economic advantage of trust is that transaction costs – especially costs of policing and enforcement – are reduced when buyers and sellers can seal an agreement with a handshake. Additional benefits enjoyed in trusting societies are demonstrated in other chapters in this volume. This chapter’s review of the literature on inequality and trust concentrates on economic inequality, which belongs to the category of inequality of outcome (or welfare) and excludes inequality of opportunity (which disregards inequalities that are due to differences in effort). In the empirical parts of the chapter the definition of inequality is even narrower. Probably since...

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