Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26217
Authors: 
Greiner, Ben
Ockenfels, Axel
Werner, Peter
Year of Publication: 
2007
Series/Report no.: 
CESifo working paper 2173
Abstract: 
We study the interplay of inequality and trust in a dynamic game, in which 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 starting 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.
Subjects: 
inequality
trust
growth
laboratory experiments
JEL: 
C73
C92
D63
E25
O15
Document Type: 
Working Paper

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