Race, Trust and Social Capital

In a recent paper, Robert Putnam presents findings that racial and ethnic diversity erodes trust among neighbors. Given trends in global immigration, coupled with the centrality of trust to social capital, these findings are par ticularly disturbing. However, there may be reason to believe that Putnamfis new findings are a false alarm; that individuals and families base their choice of residence in part on the racial and ethnic composition of cities and neigh borhoods. If this is the case, then many agents will naturally prefer to live near members of their own race - a group with which they are likely to have a high level of trust. While such endogenous sorting into racially homogeneous neighborhoods may affect the formation of social capital, it does not imply that the objectives of diversity and social capital are mutually exclusive. This paper presents evidence that this type of sorting does indeed oc cur, creating the appearance of a negative effect of diversity on trust between neighbors. Before presenting this evidence, this paper gives a brief overview of the the oretical impacts of social capital formation, discuss the mutual relationships between diversity, racial attitudes and social capital, and present an anal ysis of the relationship between social capital, diversity and the residential location decisions of families and individuals.