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Cities and cultures

In: Firms and Workers in a Globalized World Larger Markets, Tougher Competition

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  • Gianmarco I.P. Ottaviano
  • Giovanni Peri

Abstract

We investigate whether cultural diversity across US cities (measured as the variety of native languages spoken by city residents) is associated with any effect on their productivity. Diversity of cultures may imply diversity of production skills, of abilities and of occupations that enhances the productive performance of a city. On the other hand transaction costs and frictions across groups may hurt productivity. Similarly, diversity in available goods and services can increase utility but distaste for (or hostility to) different cultural groups may decrease it. Using census data from 1970 to 1990, we find that wages and employment density of US-born workers were systematically higher, ceteris paribus, in cities with richer linguistic diversity. These positive correlations reveal a net positive effect of diversity on productivity that survives robustness checks and instrumental variable estimation. This effect is found to be stronger for highly educated workers and for white workers. We also show that better ‘assimilated’ non-native speakers, i.e. those who speak English well and have been in the US for more than five years, are most beneficial to the productivity of US-born workers.

Suggested Citation

  • Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "Cities and cultures," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 6, pages 153-186, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811233395_0006
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    More about this item

    Keywords

    Allocative Efficiency; Immigration; Inequality; Innovation; International Competition; International Trade; Macroeconomic Effects of Globalization; New Economic Geography; New Trade Theory; Offshoring; Regional Decline; Regional Growth; Territories; Waves of Globalization; Winners and Losers from Globalization; Borders; Creative Destruction; Cultural Diversity; Economic Geography; Economic Growth; Firm Heterogeneity; Firms and Workers; Globalization;
    All these keywords.

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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