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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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    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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