Weaving new threads into our cultural tapestry

Since the time of European settlement, Australia has been shaped by immigration. Successive waves of newcomers from Europe, the Americas, Asia, the Pacific, and the Middle East have enriched Australia in many ways. From a pure economic standpoint, immigration supplements our labour market with much-needed skills.

In a deeper sense, immigration is valuable because it weaves new threads into our cultural tapestry. Native-born children have much to learn from their migrant peers, just as adults can gain a deeper understanding of the world from yarning over the back fence with their foreign-born neighbours. And our restaurants would be bland imitations of themselves without the flavours brought by successive waves of Italian, Thai and Vietnamese immigrants.

Yet the impact of immigration goes beyond the economic and the culinary effects. One area that is less commonly discussed is the relationship between ethno-linguistic diversity and interpersonal trust. The results of a succession of studies suggest that we may have to work harder if we are to make Australia both diverse and high in trust.

Trust is important because it acts as a kind of "social glue" that enables business and communities to operate more effectively. In regions 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. For these reasons, social capital, once solely the domain of sociologists, has increasingly attracted attention from economists.

An important question in this research is why trust is higher in some areas than others. To better understand patterns of trust across Australia, I used data from the Australian Community Survey (carried out by Edith Cowan University and NCLS Research), which asked 6,500 respondents whether they agreed with the statement that "Generally speaking, you can't be too careful in dealing with most Australians".

Holding constant individual characteristics, clear neighbourhood patterns emerge. Trust is higher in rural Australia than in cities, and higher in richer neighbourhoods 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 that the main issue may be whether people can communicate effectively with those living nearby.

The effect of diversity operates on immigrants and locals alike. In more linguistically diverse suburbs, both foreign-born and Australian-born respondents are less inclined to trust those around them.

The negative relationship between trust and ethnic diversity is not unique to Australia. In the United States, work by Alberto Alesina and Eliana La Ferrara has produced very similar results to my own: holding constant a raft of other factors, US cities that are more diverse tend to be less trusting.

Other research has reached similar conclusions. One study that looked at productivity on a British farm found that more ethnically heterogenous teams picked less fruit. In the US Civil War, desertion rates from the Union Army were higher in more ethnically diverse companies. Across communities in Pakistan, infrastructure projects are better maintained where there are fewer clan, religious and political divisions. Across Kenyan school districts, ethnic and linguistic diversity is associated with worse school facilities and less voluntary fundraising.

Across countries, there is a negative correlation between ethnic fractionalisation and growth, which researchers William Easterly and Ross Levine attribute to ethnic diversity making it more difficult for countries to agree on the provision of public goods and pro-growth policies.

Over the coming decades, it is a safe bet that most developed countries will become more ethnically and linguistically diverse.