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Effects of cultural diversity on individual establishments

  • Stephan Brunow

    ()

    (Institute for Employment Research)

  • Uwe Blien

    ()

    (Institute for Employment Research)

International immigration affects the degree of cultural diversity present in a labour force. This paper focuses on the consequences of immigration with respect to the level of cultural diversity by estimating employment functions for individual establishments. The theory behind the empirical analyses is based on a "turned around" New Economic Geography model. The data basis used is a linked employer - employee data set generated by a fusion of the IAB Establishment Panel with the Employment Statistics of Germany, which provides very detailed information about individual workers and establishments. In the empirical analyses it is shown that employment is lower when the degree of diversity is higher, regarding the revenue of an individual establishment as given. From this result it can be derived under the conditions of monopolistic competition (implying elastic product demand) that the establishment is able to occupy a relatively large part of the market. Finally this implies relatively high labour demand.

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Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2011006.

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Date of creation: Apr 2011
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Handle: RePEc:nor:wpaper:2011006
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