The dynamic interplay of inequality and trust
Subtitle: an experimental study
By: Ben Greiner, Axel Ockenfels, and Peter Werner
Contributors: Ockenfels, Axel; Werner, Peter, 1969-; Harvard Business School
Series: Working paper / Harvard Business School -- 08-026; Working paper (Harvard Business School) -- 08-026
Publisher: Harvard Business School
Published: 2008
Place of publication: Boston]
Language: eng
Number of pages: 27
Description: We study the interplay of inequality and trust in a dynamic game, where trust increases efficiency and thus allows higher growth of the experimental economy in the future. We find that trust is initially high in a treatment starting with equal endowments, but decreases over time. In a treatment with unequal endowments, trust is initially lower yet remains relatively stable. The difference seems partly due to the fact that equal start positions increase subjects' inclination to condition their trust decisions on wealth comparisons, whereas conditional trust is much less prevalent with unequal initial endowments. As a result, with respect to efficiency, the initially more unequal economy fares worse in the short run but better in the long run, and the disparity of wealth distributions across economies mitigates over time.
Notes: "October 2007"--Publisher's web site.

Includes bibliographical references.