Andrea Tesei (Universitat Pompeu Fabra)

“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 income inequality reduces social capital. Also, racial fragmentation is no longer a signicant determinant of social capital once racial income inequality is accounted for. This result is consistent with a simple conceptual framework where concurrent dierences 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 in the majority group when racial income inequality increases.