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Ethnic Diversity and Preferences for Redistribution

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Author Info

  • Dahlberg, Matz

    ()
    (Uppsala University)

  • Edmark, Karin

    ()
    (Research Institute of Industrial Economics (IFN))

  • Lundqvist, Heléne

    ()
    (Uppsala University)

Abstract

In recent decades 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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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 860.

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Length: 34 pages
Date of creation: 19 Jan 2011
Date of revision:
Handle: RePEc:hhs:iuiwop:0860

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Keywords: Income redistribution; Ethnic heterogeneity; Immigration;

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References

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  1. Woojin Lee & John Roemer & Karine Van der Straeten, 2006. "Racism, Xenophobia, and Redistribution," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 446-454, 04-05.
  2. 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 473, Econometric Society.
  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 2729, C.E.P.R. Discussion Papers.
  4. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  5. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
  6. repec:pse:psecon:2008-43 is not listed on IDEAS
  7. Christer Gerdes, 2011. "The Impact of Immigration on the Size of Government: Empirical Evidence from Danish Municipalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 74-92, 03.
  8. Claudia Senik & Holger Stichnoth & Karine Straeten, 2009. "Immigration and Natives’ Attitudes towards the Welfare State: Evidence from the European Social Survey," Social Indicators Research, Springer, vol. 91(3), pages 345-370, May.
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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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