This paper analyzes how the interaction of ethnicities and cultures impacts on productivity and employment on Greek local labor markets, within the 20‐year interval between 1991 and 2011. We compute two alternative proxies for cultural diversity, namely the fractionalization and the polarization index, using information on 118 countries of origin. We also account for the potential endogenous allocation of individuals across local labor markets by employing a “shift‐share” instrument, exploiting the fact that networks play an important role in the settlement patterns of recent migrants. Our identification strategy indicates that the contribution of diversity in terms of birthplace is positive, at least up to a certain point. This finding appears to be robust and not driven by the inclusion of further controls, outliers, spatial autocorrelation, and selection on unobservables. Interestingly, we find that ethnic heterogeneity helps employment and productivity by promoting sectoral diversity.

This paper examines the relationship between immigration and host countries' institutional quality, using international migration data for a sample of 130 countries over the 1990-2015 period. We employ two composite metrics of political institutions, encompassing multiple dimensions of governance. To reduce endogeneity concerns, related to immigrant settlement patterns, we employ pseudo-gravity-based instruments in a 2SLS setting.Overall, our findings withstand several robustness checks and suggest that immigration has a negative and statistically significant impact on the level of institutional development of the countries analyzed in this study. However, there is substantial heterogeneity, since the impact of migrants appears to be somewhat stronger in less developed host countries. Interestingly, these findings are entirely driven by migrants stemming from countries displaying low institutional development.

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