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Ethnic Diversity and Preferences for Redistribution

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  • Matz Dahlberg
  • Karin Edmark
  • Heléne Lundqvist

Abstract

In recent decades, the immigration of workers and refugees to Europe has increased substantially, and the composition of the population in many countries has consequently become much more heterogeneous in terms of ethnic background. If people exhibit in-group bias in the sense of being more altruistic to one's own kind, such increased heterogeneity will lead to reduced support for redistribution among natives. This paper exploits a nationwide program placing refugees in municipalities throughout Sweden during the period 1985{94 to isolate exogenous variation in immigrant shares. We match data on refugee placement to panel survey data on inhabitants of the receiving municipalities to estimate the causal effects of increased immigrant shares on preferences for redistribution. The results show that a larger immigrant population leads to less support for redistribution in the form of preferred social benefit levels. This reduction in support is especially pronounced for respondents with high income and wealth. We also establish that OLS estimators that do not properly deal with endogeneity problems - as in earlier studies - are likely to yield positively biased (i.e., less negative) effects of ethnic heterogeneity on preferences for redistribution.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3325.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3325

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Keywords: income redistribution; ethnic heterogeneity; immigration;

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References

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  1. Karin Edmark & Matz Dahlberg, 2004. "Is There a "Race-to-the-Bottom" in the Setting of Welfare Benefit Levels? Evidence from a Policy Intervention," Econometric Society 2004 North American Summer Meetings, Econometric Society 473, Econometric Society.
  2. Woojin Lee & John Roemer & Karine van der Straeten, 2005. "Racism, xenophobia, and redistribution," UMASS Amherst Economics Working Papers, University of Massachusetts Amherst, Department of Economics 2005-15, University of Massachusetts Amherst, Department of Economics.
  3. Åslund, Olof & Edin, Per-Anders & Fredriksson, Peter, 2001. "Ethnic Enclaves and the Economic Success of Immigrants - Evidence from a Natural Experiment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2729, C.E.P.R. Discussion Papers.
  4. Christer Gerdes, 2011. "The Impact of Immigration on the Size of Government: Empirical Evidence from Danish Municipalities," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 113(1), pages 74-92, 03.
  5. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
  6. Claudia Senik & Holger Stichnoth & Karine Van Der Straeten, 2008. "Immigration and natives' attitudes towards the welfare state: Evidence from the European Social Survey," PSE Working Papers halshs-00586256, HAL.
  7. Erzo F.P. Luttmer, 1999. "Group Loyalty and the Taste for Redistribution," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 61, Northwestern University/University of Chicago Joint Center for Poverty Research.
  8. repec:pse:psecon:2008-43 is not listed on IDEAS
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  1. The dream of a post-racial America
    by Noah Smith in Noahpinion on 2013-06-29 06:38:00
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