One of the thorniest issues I’ve delved into as a researcher is the relationship between trust and heterogeneity. In a piece in the AFR today, I discuss some of the findings from my research (warning: PDF with regression tables).
The full text of the AFR oped is over the fold. In my view, this is a hard issue, but it’s important that those who support immigration don’t shy away from the possibility that ethnic heterogeneity may have negative impacts. For pro-immigration social democrats, similar issues arise with regard to diversity and welfare.
Lies and Statistics, Australian Financial Review, 23 July 2005
Trust makes society work better, says Andrew Leigh.
In places where people trust one another, institutions, markets and societies seem to work better. Trusting societies have more effective bureaucracies, schools that function more efficiently, less corruption, and faster growth. Trust acts as a kind of "social glue" that enables business and communities to operate more effectively. For these reasons, social capital, once solely the domain of sociologists, has increasingly attracted attention from economists.
What determines why some people are more trusting than others? To answer this question, I used data from the Australian Community Survey (carried out by Edith Cowan University and NCLS Research), which asked over 6000 respondents whether they agreed with the statement, "Generally speaking, you can’t be too careful in dealing with most Australians". Responses were used to class people as trusting or distrusting.
Using multiple regression analysis, it is possible to test the effect of various demographic factors, holding other factors constant. At an individual level, gender makes little difference, but better educated people and those who work full-time are more likely to be trusting. By contrast, longer commuting times are associated with lower levels of trust, which may be due to the fact that commuting time crowds out social activities.
It is also possible to observe the effect of neighbourhoods. We see how trust changes when we look at similar individuals who live in different communities. At a neighbourhood level, trust is higher in rural Australia than in cities, and higher in richer areas than in poor ones.
Neighbourhood-level analysis also throws up a startling finding: trust is lower in ethnically diverse neighbourhoods. Residents of multi-racial neighbourhoods are more likely to agree that "you can’t be too careful in dealing with most Australians". In particular, neighbourhoods where many languages are spoken tend to have lower levels of trust, suggesting the main issue may be whether people can communicate effectively with those living nearby.
The negative relationship between trust and ethnic diversity in Australia is similar in size to results found in the US by economists Alberto Alesina and Eliana La Ferrara. However, while they conclude the US effect is mostly driven by white Americans’ aversion to ethnic diversity, I find only limited evidence that those born in Australia are hostile to diversity. Instead, most of the negative relationship between diversity and trust appears to operate through those who are born overseas. Trust is particularly low among immigrants living in racially diverse neighbourhoods.
Since Australia and the US are both "settler societies" that experienced high levels of immigration in the postwar era, it is perhaps not surprising to find a negative relationship between ethnic heterogeneity and trust in both countries. But this should be weighed against the substantial benefits of immigration. Although reducing diversity might raise levels of trust, it would likely be detrimental to society on balance. Instead, policymakers should focus attention on the problem itself: building local trust in immigrant communities.
Andrew Leigh is an economist at the Australian National University. The full research paper is available at www.andrewleigh.com.