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Ethnic Diversity and Trust: New Evidence from Australian Data

34 Pages Posted: 26 Dec 2015  

Silvia Mendolia

University of Aberdeen

Alex Tosh

University of Wollongong - School of Accounting, Economics & Finance

Oleg Yerokhin

University of Wollongong - Department of Economics

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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.

Keywords: trust, social capital, ethnic fractionalization, ethnic heterogeneity, HILDA

JEL Classification: J15, Z10

Suggested Citation

Mendolia, Silvia and Tosh, Alex and Yerokhin, Oleg, Ethnic Diversity and Trust: New Evidence from Australian Data. IZA Discussion Paper No. 9544. Available at SSRN: https://ssrn.com/abstract=2708357

Silvia Mendolia (Contact Author)

University of Aberdeen ( email )

Dunbar Street
Aberdeen AB24 3QY, Scotland AB24 3QY
United Kingdom
0044 1224 272182 (Phone)

Alex Tosh

University of Wollongong - School of Accounting, Economics & Finance

Northfields Avenue
Wollongong, NSW 2522
Australia

Oleg Yerokhin

University of Wollongong - Department of Economics ( email )

Building 40A, Level 2
Wollongong, NSW 2522
Australia

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