Income Inequality and Social Trust in Urban Communities: Moderating Role of Governance Quality

Abstract

Income inequality has become a defining feature of modern urban societies, raising concerns about its impact on social cohesion and trust. Social trust, defined as the belief in the reliability and integrity of others and institutions, is essential for fostering cooperation, economic development, and societal well-being. This study examines the relationship between income inequality and social trust in urban communities, with a particular focus on the moderating role of governance quality. Drawing on social capital theory and institutional theory, the study proposes that higher levels of income inequality reduce social trust by increasing perceptions of unfairness, social distance, and exclusion. However, governance quality, characterized by transparency, accountability, rule of law, and effectiveness, is expected to moderate this relationship by mitigating the negative effects of inequality. A quantitative research design was employed, and data were collected from urban residents using structured questionnaires. Structural Equation Modeling using Smart PLS was applied to test the hypothesized relationships. The findings indicate that income inequality has a significant negative effect on social trust. This is consistent with empirical evidence showing that higher inequality undermines trust through both psychological and structural mechanisms. Furthermore, governance quality was found to significantly moderate this relationship, such that the negative impact of inequality on trust is weaker in contexts with high governance quality. Research suggests that effective governance enhances perceptions of fairness and social cohesion, thereby strengthening trust. The study concludes that while income inequality poses a threat to social trust, strong governance systems can mitigate its adverse effects. Policymakers should prioritize reducing inequality and improving governance to promote social cohesion in urban communities.