Spillovers from Immigrant Diversity in Cities

Abstract

Using comprehensive longitudinal matched employer-employee data for the U.S., this paper provides new evidence on the relationship between productivity and immigration-spawned urban diversity. Existing empirical work has uncovered a robust positive correlation between productivity and immigrant diversity, supporting theory suggesting that diversity acts as a local public good that makes workers more productive by enlarging the pool of knowledge available to them, as well as by fostering opportunities for them to recombine ideas to generate novelty. This paper makes several empirical and conceptual contributions. First, it improves on existing empirical work by addressing various sources of potential bias, especially from unobserved heterogeneity among individuals, work establishments, and cities. Second, it augments identification by using longitudinal data that permits examination of how diversity and productivity co-move. Third, the paper seeks to reveal whether diversity acts upon productivity chiefly at the scale of the city or the workplace. Findings confirm that urban immigrant diversity produces positive and nontrivial spillovers for U.S. workers. This social return represents a distinct channel through which immigration generates broad-based economic benefits.

Valuing cultural diversity of cities

“…The estimated wage impact of diversity is for 4.0% higher wages in response to diversity that is one standard deviation higher. This is quite comparable but slightly weaker than the 6% impact reported by Kemeny and Cooke (2018). The magnitude of the diversity effects on QB and QL are substantial.…”

“…Ottaviano & Peri (2005) find a positive and significant effect of linguistic diversity on average wages across US cities, but a negative effect of skill diversity, measured across four qualification-based skill groups. Kemeny & Cooke (2018) find a robust positive wage effect of birthplace diversity within US cities and within firms on wages. Their use of linked employeremployee data on US firms allows them to control for firm, worker, and region-year variation.…”

Misperceptions about Immigration: Reviewing Their Nature, Motivations and Determinants

“…Regarding the economy, many view immigration as a burden and immigrants as soldiers of fortune with whom they must now share their hard-earned wealth (Caplan 2007;Johnston and Ballard 2016;McLaren and Johnson 2007). Economists have repeatedly refuted this sentiment, underscoring the welfare-enhancing effects of immigration instead (see, e.g., Dustmann and Preston 2019;Johnston and Ballard 2016;Kemeny and Cooke 2018). A similar gap between perceptions and evidence exists with respect to whether immigration is detrimental to wages (Bansak, Simpson and Zavodny 2021;Scheve and Slaughter 2001) and employment (McLaren and Johnson 2007): empirical economic research has found negligible, if any, effects in either case (see, e.g., Battisti et al 2018;Beerli et al 2021;Friedberg and Hunt 1995;Manacorda, Manning and Wadsworth 2012;Ottaviano and Peri 2012).…”

The changing shape of spatial inequality in the United States

“…From these same data we estimate the proportion of the local labor force that self-identifies as black; and the share that is foreign-born. The latter indicates both the vibrancy of the local economy, but also its openness to diversity, considered to be linked to economic performance (Page, 2007;Ottaviano and Peri, 2012;Kemeny and Cooke, 2018). The measure of the local share of black workers captures a complex and key dimension of the American experience, involving historical patterns of settlement as well as internal migration and resettlement during the Great Migration of the 20th century (Boustan, 2016).…”