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    1. Fischer: Senior Researcher, University of Mannheim, Faculty of Economics, L7, 3-5, 68131 Mannheim, Germany; Associate Professor, University of Oradea, Department of International Relations and European Studies (RISE), Faculty of History, Geography, and International Relations, str. Universitatii, nr.1, 410087 Oradea, Romania. Phone +41 (0)31 6313432, Fax +41 (0) 31 631 3630, E-mail
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    1. Torgler: Professor, Queensland University of Technology, School of Economics and Finance, GPO Box 2434, Brisbane, Australia; EBS Universität für Wirtschaft und Recht, EBS Business School, ISBS, Rheingaustrasse 1 65375 Oesterich-Winkel, Germany; CREMA-Center for Research in Economics, Management and the Arts, Gellertstrasse 18, CH-4052 Basel, Switzerland. Phone +61 7 3138 2517, Fax +61 7 3138 1500, E-mail
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    • Both authors wish to thank Steven Stillman, an anonymous referee, and conference participants at the European Economic Association Conference (2007), Aarhus School of Business (2007), Annual Congress of the Verein fuer Socialpolitik (2007), European and American Public Choice Conferences (both 2006) for their suggestions. Both authors gratefully acknowledge financial support from the Swiss National Science Foundation (SNF). Justina Fischer is also grateful for the Marie Curie fellowship scheme (RTN ENABLE) for funding and the DIW Berlin for her hospitality. We also wish to thank Julia Angelica and Alison Macintyre for professional editing.


Research on the effects of positional concerns on individuals' attitudes and behavior is sorely lacking. To address this deficiency, we use the International Social Survey Programme 1998 data on 25,000 individuals from 26 countries to investigate the impact of relative income position on three facets of social capital: horizontal and vertical trust as well as norm compliance. Testing relative deprivation theory, we identify a deleterious positional income effect for persons below the reference income, particularly for their social trust and confidence in secular institutions. Also often a social capital-lowering effect of relative income advantage occurs, while a rise in absolute income almost always contributes positively. These results indicate that a rise in income inequality in a society too large is rather detrimental to the formation of social capital. (JEL Z130, I300, D310)

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