A long-standing debate persists regarding how social capital relates to diversity and inequality in the American states. Putnam argues social capital leads to greater equality and tolerance; however, others find that it increases racial inequality. We build on Soss, Fording, and Schram’s Racial Classification Model (RCM) and theorize that social capital enhances social trust and empathy in homogeneous contexts and favors paternalistic and punitive social controls in diverse contexts. We test this using the case of immigration and welfare generosity following the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996. Using state-level data from 1997 to 2009, we find that under conditions of low immigration, social capital is associated with increased social trust and empathy; however, as immigration increases, social capital pivots toward favoring mechanisms of social control. Specifically, social capital increases Temporary Assistance for Needy Families (TANF) cash benefit levels, but only when immigration levels are low. In high-immigration contexts, social capital is associated with decreased welfare generosity.
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