Events at CERGE-EI

Andrea Tesei

Universitat Pompeu Fabra, Barcelona, Spain

Racial Fragmentation, Income Inequality and Social Capital Formation: New Evidence from the US

Abstract: 

Existing studies of social capital formation in US metropolitan areas have found that social capital is lower when there is more income inequality and greater racial fragmentation. I add to this literature by examining the role of income inequality between racial groups (racial income inequality). I find that greater racial inequality reduces social capital. Also, racial fragmentation is no longer a significant determinant of social capital once racial income inequality is accounted for. This result is consistent with a simple conceptual framework where concurrent differences in race and income are especially detrimental for social capital formation. I find empirical support for further implications deriving from this assumption. In particular, I show that racial income inequality has a more detrimental effect in more racially fragmented communities and that trust falls more in minority groups than the majority group when racial income inequality increases.

Full Text: “Racial Fragmentation, Income Inequality and Social Capital Formation: New Evidence from the US”