We survey the emerging empirical literature that identifies a negative relationship between heterogeneity of race, ethnicity, income etc. at the neighborhood level, and individuals’ likelihood of contributing money or time to public goods or of trusting their neighbors. One problem in this literature is that the “neighborhoods” used are often by necessity overly broad, and arguably not those that individuals experience day to day. We present a simple model showing the effect of neighbourhood definition when measuring the effect of heterogeneity on peoples’ actions or attitudes. The broad definitions commonly used could produce a spurious negative effect of heterogeneity. With these limitations in view, we use panel data from the 1996, 2001 and 2006 censuses in New Zealand to test whether heterogeneity by race/ethnicity, birthplace, income or language negatively affect New Zealander’s probability of volunteering. Using cross sectional analysis, we estimate the effect of each kind of heterogeneity on volunteering at the “meshblock” (tract) and broader “area unit” levels. We control for confounding neighbourhood characteristics such as household income and deprivation, employment and education status, and religious affiliation. We next address the issue of endogenous self-selection to neighbourhood by comparing cross sectional and fixed effects analysis over the three years of the census. In results, we find that the size of neighbourhood unit significantly affects the estimated effects of heterogeneity on volunteering. Second, in cross sectional analysis at the meshblock level, volunteering appears reduced by heterogeneity of race/ethnicity and language, not affected by heterogeneity of birthplace, and increased by heterogeneity of household income. Third, in fixed effects analysis only racial/ethnic heterogeneity retains a direct negative effect on volunteering.
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Paper provided by University of Canterbury, Department of Economics in its series Working Papers in Economics with number
09/09.
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