Is Trust Affected by Income Inequality?

Abstract: Contributing to a growing body of literature on the determinants of trust, I explore how municipal income inequality affects trust at local level (“localized trust”) and at general level (“generalized trust”). Using Swedish population and survey data 1996-2014, I find a negative relationship between a vast majority of inequality and trust variables studied. Even though the association is often statistically significant, the practical effects are nevertheless low. In accordance with previous research, I find that standard level changes in income inequality do not affect municipal levels of generalized trust. However, large increases in municipal poverty rates seem to decrease localized trust, when the rates are based on disposable income. Inequality in disposable income is more strongly associated with the two forms of trust than pre-tax inequality, suggesting that trust can be influenced by means of income redistribution.