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Ethnic Diversity and Trust: New Evidence from Australian Data

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  • Silvia Mendolia
  • Alex Tosh
  • Oleg Yerokhin

Abstract

This paper investigates the relationship between neighbourhood ethnic and linguistic heterogeneity and the formation of an individual's local and general trust. A wide literature across economics and sociology has recognised the importance of trust in facilitating economic growth and development and it is therefore important to investigate elements of social organisation that encourage or inhibit the development of trust. We use fixed effects and instrumental variable regression and control for a wide set of individual and local area characteristics to identify the effect of heterogeneity on trust formation. Our results show that increasing neighbourhood ethnic and linguistic fractionalisation is associated with a decrease in local trust of about 12% of a standard deviation in the model with fixed effects, while we do not find any significant relationship between neighbourhood heterogeneity and general trust.
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Suggested Citation

  • Silvia Mendolia & Alex Tosh & Oleg Yerokhin, 2016. "Ethnic Diversity and Trust: New Evidence from Australian Data," The Economic Record, The Economic Society of Australia, vol. 92(299), pages 648-665, December.
    • Handle: RePEc:bla:ecorec:v:92:y:2016:i:299:p:648-665
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    File URL: http://hdl.handle.net/10.1111/1475-4932.12295
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    References listed on IDEAS

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    1. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, September.
    2. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    3. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & J�rgen Schupp & Gert G. Wagner, "undated". "A Nation-Wide Laboratory: Examining trust and trustworthiness by integrating behavioral experiments into representative surveys," IEW - Working Papers 141, Institute for Empirical Research in Economics - University of Zurich.
    4. Dustmann, Christian & Preston, Ian, 2001. "Attitudes to Ethic Minorities, Ethnic Context and Location Decisions," Economic Journal, Royal Economic Society, vol. 111(470), pages 353-373, April.
    5. Cong Wang & Bodo Steiner, 2015. "Can ethnic-linguistic diversity explain cross-country differences in social capital formation?," Working Papers 6, University of Southern Denmark, Centre for Border Region Studies.
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    Cited by:

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    More about this item

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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