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The Economic Value of Cultural Diversity: Evidence from US Cities

  • Gianmarco I.P. Ottaviano
  • Giovanni Peri

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 only with a net positive effect of cultural diversity on productivity of natives.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10904.

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Date of creation: Nov 2004
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Publication status: published as Gianmarco I.P. Ottaviano & Giovanni Peri, 2006. "The economic value of cultural diversity: evidence from US cities," Journal of Economic Geography, Oxford University Press, vol. 6(1), pages 9-44, January.
Handle: RePEc:nbr:nberwo:10904
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