The United States is growing increasingly diverse, so it is important that economists understand the macroeconomic consequences of diversity within the US economy. International analyses often argue that heterogeneity reduces macroeconomic productivity by engendering corruption, political instability, and social turmoil. However, other studies claim that diversity improves creative decision making and augments productivity. This paper exploits differences in diversity across regions of the United States from 1980 to 2000 to determine whether racial heterogeneity creates macroeconomic gains or losses for states and cities. Fixed effects analysis indicates that diversity enhances the productivity of cities. Evidence at the state-level is more ambiguous, as significant results only appear in random effects specifications.
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Paper provided by Department of Economics, Colgate University in its series Working Papers with number
2007-01.
Length: 27 pages Date of creation: 30 Nov 2007 Date of revision: Handle: RePEc:cgt:wpaper:2007-01
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