Premium
In‐Group versus Out‐Group Trust: The Impact of Income Inequality
Author(s) -
Lei Vivian,
Vesely Filip
Publication year - 2010
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/sej.2010.76.4.1049
Subject(s) - inequality , dictator game , economics , economic inequality , dictator , group (periodic table) , income distribution , inequity aversion , in group favoritism , demographic economics , income inequality metrics , labour economics , microeconomics , social psychology , psychology , social group , political science , law , mathematics , mathematical analysis , chemistry , organic chemistry , social identity theory , politics
In this article, we adopt a variant of the trust game by Berg, Dickhaut, and McCabe (1995) and the dictator game by Cox (2004) to determine if income inequality can activate in‐group favoritism and, if so, whether such a bias is strong enough to survive the removal of income inequality. We find evidence of in‐group favoritism only on the part of rich first movers. Rich first movers trust their in‐group members significantly more in the presence of income inequality not only before but also after they gain enough experience. Poor first movers, in contrast, do not exhibit such in‐group bias. They do not discriminate between in‐group and out‐group at the very outset of the experiment, and once they become experienced, they behave with significantly more trust toward the rich than toward the poor. We also find that in‐group and out‐group favoritism established in the past can be alleviated, but not completely removed, by an equal income distribution.