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Ethnic Diversity and Preferences for Redistribution

  • Dahlberg, Matz

    ()

    (Uppsala Center for Fiscal Studies)

  • Edmark, Karin

    ()

    (Uppsala Center for Fiscal Studies)

  • Lundqvist, Heléne

    ()

    (Uppsala Center for Fiscal Studies)

In recent decades, the 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) e ects of ethnic heterogeneity on preferences for redistribution.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2011:1.

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Length: 43 pages
Date of creation: 08 Jan 2011
Date of revision:
Handle: RePEc:hhs:uufswp:2011_001
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  1. Dahlberg, Matz & Edmark, Karin, 2008. "Is there a "race-to-the-bottom" in the setting of welfare benefit levels? Evidence from a policy intervention," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1193-1209, June.
  2. 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.
  3. 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.
  4. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods And Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1243-1284, November.
  5. Erzo F.P. Luttmer, 1999. "Group Loyalty and the Taste for Redistribution," Working Papers 9902, Harris School of Public Policy Studies, University of Chicago.
  6. repec:pse:psecon:2008-43 is not listed on IDEAS
  7. Edin, Per-Anders & Fredriksson, Peter & Åslund, Olof, 2000. "Ethnic enclaves and the economic success of immigrants - evidence from a natural experiment," Working Paper Series 2000:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  8. Claudia Senik & Holger Stichnoth & Karine Van Der Straeten, 2008. "Immigration and natives' attitudes towards the welfare state: Evidence from the European Social Survey," PSE Working Papers halshs-00586256, HAL.
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