A New Old Macroeconomics of Social Cohesion:

A New Old Macroeconomics of Social Cohesion:

Rising Prosperity Still Trumps Rising Inequality, at Least for Many
Markus Gangl, OSC Scientific Seminar, 18th June 2021
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OSC Scientific Seminar 2020-2021

Friday 18th June 2021, 11:30 am / 1:00 pm (Zoom videoconference)

A New Old Macroeconomics of Social Cohesion:
Rising Prosperity Still Trumps Rising Inequality, at Least for Many

Markus Gangl
Professor of Sociology

Goethe-University Frankfurt, Dpt of Social Sciences

The presentation takes up concerns about socially corrosive effects of rising economic inequality in Western societies. We compile a harmonized database of cross-nationally comparable survey data from 32 countries and spanning a four-decade observation window to provide new evidence on the relationship between inequality and social trust. We not the least conduct our research in response to the empirical challenge posed by the conflicting evidence from prior research based on cross-sectional data (that generally confirms a negative effect of inequality on trust) and more recent studies using longitudinal designs (that offer much less conclusive evidence, at least when considering countries other than the United States).
Based on our own estimates, we contribute the following key observations: first, rising economic inequality has led to lower levels of trust, but properly isolating this effect requires to account for the role of simultaneous increases in prosperity. Rising prosperity increases social trust, and tends to empirically outweigh the adverse effects of rising inequality in the aggregate. However, there is evidence of a tunnel effect, i.e. declining tolerance of inequality at higher levels of prosperity, so that inclusive growth and public redistribution become increasingly important for sustaining social cohesion.
Finally, we find that positive implications of rising prosperity to a significant extent accrue as private gains among successful citizens, so that the contextual effects of macroeconomic conditions appear decidedly more negative than their total effects. As contextual effects furthermore vary by level of education, we find rising prosperity (but not rising inequality) to create an increasing trust wedge between privileged and less fortunate members of society.

Registration is mandatory to join the ZOOM meeting (the link will be sent one day before).

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