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Racial Diversity and Aggregate Productivity in U.S. Industries: 1980-2000

This paper employs industry-level U.S. Census data from 1980-2000 to assess the aggregate effects of racial diversity. While most international accounts find that diversity reduces productivity, I argue that the U.S. experience is more nuanced. Unqualified statements about the costs and merits of diversity are unwarranted, as racial heterogeneity increases productivity within many, but not all, industries. Sectors employing a large number of workers responsible for creative decision-making and customer service experience gains from diversity, while industries characterized by high levels of group effort suffer losses. The results thus reconcile two competing literatures by suggesting that diversity improves decision-making and problem solving, but also encumbers common action and public goods provision.

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File URL: http://commons.colgate.edu/cgi/viewcontent.cgi?article=1001&context=econ_facschol
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Paper provided by Department of Economics, Colgate University in its series Working Papers with number 2007-02.

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Date of creation: Nov 2007
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Handle: RePEc:cgt:wpaper:2007-02
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  1. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
  2. Sparber, Chad, 2007. "Racial Diversity and Macroeconomic Productivity across US States and Cities," Working Papers 2007-01, Department of Economics, Colgate University.
  3. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
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  7. Fearon, James D, 2003. " Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
  8. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  9. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  10. Ottaviano, Gianmarco & Peri, Giovanni, 2004. "Cities and Cultures," CEPR Discussion Papers 4438, C.E.P.R. Discussion Papers.
  11. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  12. 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.
  13. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
  14. Alesina, Alberto & La Ferrara, Eliana, 2005. "Ethnic Diversity and Economic Performance," Scholarly Articles 4553005, Harvard University Department of Economics.
  15. David Neumark, 1998. "Labor Market Information and Wage Differentials by Race and Sex," NBER Working Papers 6573, National Bureau of Economic Research, Inc.
  16. Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162.
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