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The economic value of cultural diversity: evidence from US cities

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

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  • Gianmarco I.P. Ottaviano
  • Giovanni Peri

Abstract

What are the economic consequences to U.S. natives of the growing diversity of American cities? Is their productivity or utility affected by cultural diversity as measured by diversity of countries of birth of U.S. residents? We document in this paper a very robust correlation: US-born citizens living in metropolitan areas where the share of foreign-born increased between 1970 and 1990, experienced a significant increase in their wage and in the rental price of their housing. Such finding is economically significant and survives omitted variable bias and endogeneity bias. As people and firms are mobile across cities in the long run we argue that, in equilibrium, these correlations are consistent with a net positive effect of cultural diversity on the productivity of natives.

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  • Gianmarco I.P. Ottaviano & Giovanni Peri, 2021. "The economic value of cultural diversity: evidence from US cities," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 7, pages 187-222, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789811233395_0007
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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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