The Effect of Migration on Trust : Individual- and Country-Level Analyses

Abstract

Albeit its importance, the relationship between migration/immigration and trust is relatively an unexplored subject in the social capital literature. Using a natural experimental setting of the German reunification, this dissertation sets out to analyze the effects of migration on trust and to address how trust is formed or destroyed. Chapters 1 and 2 investigate the impact of a shock—either positive or negative—on trust, triggered by the German reunification. In these chapters, Germanys individual-level panel data, known as the German Socio-Economic Panel (SOEP), are utilized to examine whether East Germans trust increases upon exposure to Western environment. The regression results demonstrate that spending time in the West raises East German migrants trust, which supports the view that trust is molded through contemporaneous shocks or experiences, even for East Germans whose initial stock is low. The self-selection problem of choosing migration to the West is dealt with by employing the instrumental variable approach, the finding of which suggests the robustness of the aforementioned result. The second chapter focuses on the West Germans who experienced the aftermath of the fall of the Berlin Wall, investigating the persistence of a historical shock. Whether this mass migration had an impact on West Germans trust is examined through the use of the net migration rate in the early 1990s as a proxy for the shock. Results using the random effects estimator show that West Germans trust is negatively affected by the labor supply shock, but the persistent effect is only confined to the labor force participants at the time. The subsequent analysis using various subgroups finds that perceiving migrants as labor market competitors is a possible channel through which trust is negatively affected. In the final chapter, the impact of migration or immigrants on trust is explored at the country-level with a combined dataset that includes the World Values Surveys and the European Values Surveys, the UN Migration Stock dataset, and the World Banks World Development Indicators. The impact of migration is proxied by the countrys immigrant inflow which is further distinguished by immigrants countries of origin. In addition, an age-cohort panel is constructed to test whether labor market competition is a channel through which trust is formed. It is found that the immigrant inflow of unskilled immigrants is negatively associated with trust while the effect of the inflow of skilled immigrants is insignificant. In addition, the immigration shock received at prime-age is negatively correlated with trust, which implies that natives negative perception from the labor market competition is a possible link that explains the relationship.