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Cultural Diversity and Local Labour Markets

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  • Suedekum, Jens

    (Heinrich Heine University Düsseldorf)

  • Wolf, Katja

    (Institute for Employment Research (IAB), Nuremberg)

  • Blien, Uwe

    (Institute for Employment Research (IAB), Nuremberg)

Abstract

During the last decade there have been marked changes in the composition of the non-native workforce in the German labour market. In particular there has been a notable increase in the diversity of nationalities of which the foreign workforce is composed. In this paper we investigate the effects of this diversity for native employees. Our analysis is conducted at the local level and uses a panel of 326 Western German regions over the time period 1995-2006. When considering high-skilled foreign workers, we find that both the size of this group and the diversification into different nationalities raise local wages and employment for native employees. For low-skilled foreign workers we find negative size effects. However, these negative effects can be partly offset if the group of low-skilled foreigners is culturally diversified. Our results imply that diversity raises productivity at the local level, but that it is important to distinguish the skill composition of the foreign workforce. These findings remain robust in a variety of robustness checks that take into account omitted variable bias, self-selection of foreigners into particular regions, and spatial autocorrelation.

Suggested Citation

  • Suedekum, Jens & Wolf, Katja & Blien, Uwe, 2009. "Cultural Diversity and Local Labour Markets," IZA Discussion Papers 4619, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4619
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    References listed on IDEAS

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    1. David Card, 2007. "How Immigration Affects U.S. Cities," CReAM Discussion Paper Series 0711, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    2. Zimmermann, Klaus F. (ed.), 2005. "European Migration: What Do We Know?," OUP Catalogue, Oxford University Press, number 9780199257355.
    3. Bonin, Holger, 2005. "Wage and Employment Effects of Immigration to Germany: Evidence from a Skill Group Approach," IZA Discussion Papers 1875, Institute of Labor Economics (IZA).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    immigration; cultural diversity; regional labour markets; spatial equilibrium;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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