Explaining the 'democratic malaise' in unequal societies: Inequality, external efficacy, and political trust

Previous scholarship suggests that rising inequality in democracies suppresses trust in institutions. However, the mechanism behind this has not clearly been identified. This paper investigates the proposition that income inequality leads to increased democratic distrust by depressing perceptions of external efficacy. Based on time-series cross-sectional survey data from the European Social Survey, we find that changes in income inequality have a negative effect on changes in political trust and external efficacy. Causal mediation analysis confirms that inequality affects trust through lower efficacy. Further analyses show that this efficacy-based mechanism does not depend on political orientation. As a direct effect remains among left-wing respondents, our empirical results indicate that inequality affects trust via both a mechanism of substantive output evaluation and a process-based evaluation that measures of external efficacy can capture. These findings highlight the empirical and theoretical relevance of this so far neglected mechanism and provide a potential solution for the puzzle that inequality depresses trust also among those for whom inequality is not politically salient.