The Social Effects of Ethnic Diversity at the Local Level: A Natural Experiment with Exogenous Residential Allocation

This paper demonstrates the effects of ethnic diversity on social relationships and the quality of public spaces at a very finite neighborhood level. We use detailed block level data on diversity and housing quality from a representative survey on housing in France. We show how and to what extent diversity within a neighborhood can directly affect household well-being and the quality of the common spaces, whereas the previous literature looks at more aggregate outcomes through voting channels. Our identification strategy relies on the exogeneity of public housing allocations with respect to ethnic characteristics in France, to address the bias due to endogenous residential sorting. Diversity is shown to have a negative effect on the quality of local public goods, either due to vandalism, not deterred by other-regarding preferences and social policing, or due to collective action failure to ensure effective property management. However, we find that diversity has no robust effect on public safety at a local level and, if anything, is more related to social anomie.