Heterogeneity, Income Inequality, and Social Capital: A New Perspective*

Abstract

Objective This article tests how income inequality mediates and moderates the relationship between racial diversity and social capital. We posit that racial diversity leads to higher levels of income equality, which reduces social capital. We also hypothesize that racial diversity has a stronger negative effect on social capital in places with high levels of income inequality (a compounding effect). Methods Drawing upon data from U.S. counties, we test these models using a series of regression models. Results Diversity and income inequality have negative effects on social capital. There is also evidence of both mediating and moderating effects. Income inequality partially mediates the negative relationship between diversity and social capital. As income inequality increases, the negative relationship between diversity and social capital decreases. Furthermore, we find that population growth moderates these relationships. Conclusion The relationship among social capital, income inequality, and diversity is complex. Although the direct effect is negative, there is some evidence for key mediating and moderating effects. More conceptual and empirical work is needed to assess the relationship between these concepts.