IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/560.html
   My bibliography  Save this paper

The End of the European Welfare States? Migration, Ethnic Diversity and Public Goods

Author

Listed:
  • Nikolaj A. Harmon

    (Princeton University)

Abstract

Over the last several decades global migration ows have increased rapidly, resulting in corresponding increases in the number and sizes of ethnic minorities in many places - Western Europe in particular. Given the existing theory and evidence of a negative relationship between ethnic diversity and public goods, a simple extrapolation thus suggests that the large public sectors in Western Europe will shrink. However, stark differences in the histories of ethnic confl ict, quality of institutions and timing between the European case and the settings studied in the existing literature raises concerns that such an extrapolation might be misguided. Using data on municipal elections and budgetary outcomes in Danish municipalities 1981-2001 this paper attempts to address these concerns. Employing a rich set of controls and an IV strategy based on historical housing data, the main results of the paper show that ethnic diversity has impacted outcomes of municipal elections in a way consistent with lower public good demand. Using a simple theoretical model to disentangle ethnic diversity effects from other budgetary effects, the paper further shows that the same holds true for budgetary outcomes, although an untestable but plausible auxiliary assumption is required on the budgetary process. The findings have important implications for immigration and refugee policy both in Europe and more broadly.

Suggested Citation

  • Nikolaj A. Harmon, 2010. "The End of the European Welfare States? Migration, Ethnic Diversity and Public Goods," Working Papers 1277, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:560
    as

    Download full text from publisher

    File URL: http://dataspace.princeton.edu/jspui/handle/88435/dsp01c247ds102
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 847-904.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    3. Gerdes, Christer & Wadensjö, Eskil, 2008. "The Impact of Immigration on Election Outcomes in Danish Municipalities," IZA Discussion Papers 3586, Institute for the Study of Labor (IZA).
    4. René Böheim & Karin Mayr, 2005. "Immigration and public spending," Economics working papers 2005-12, Department of Economics, Johannes Kepler University Linz, Austria.
    5. Vigdor, Jacob L., 2002. "Interpreting ethnic fragmentation effects," Economics Letters, Elsevier, vol. 75(2), pages 271-276, April.
    6. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August.
    7. Abhijit Banerjee & Lakshmi Iyer & Rohini Somanathan, 2005. "History, Social Divisions, and Public Goods in Rural India," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 639-647, 04/05.
    8. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
    9. Easterly, William, 2001. "Can Institutions Resolve Ethnic Conflict?," Economic Development and Cultural Change, University of Chicago Press, vol. 49(4), pages 687-706, July.
    10. Anna Damm, 2009. "Determinants of recent immigrants’ location choices: quasi-experimental evidence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 22(1), pages 145-174, January.
    11. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    12. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the United States Have a European-Style Welfare State?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 187-278.
    13. 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, March.
    14. Alberto Alesina & Eliana La Ferrara, 2003. "Ethnic Diversity and Economic Performance," Harvard Institute of Economic Research Working Papers 2028, Harvard - Institute of Economic Research.
    15. Jacob L. Vigdor, 2004. "Community Composition and Collective Action: Analyzing Initial Mail Response to the 2000 Census," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 303-312, February.
    16. Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
    17. Lassen, David Dreyer, 2007. "Ethnic divisions, trust, and the size of the informal sector," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 423-438, July.
    18. Khwaja, Asim Ijaz, 2009. "Can good projects succeed in bad communities?," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 899-916, August.
    19. Fisman Raymond J, 2003. "Ethnic Ties and the Provision of Credit: Relationship-Level Evidence from African Firms," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-21, October.
    20. Cagla Okten & Una Okonkwo Osili, 2004. "Contributions in heterogeneous communities: Evidence from Indonesia," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 603-626, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    migration; Denmark; elections; ethnic relations;

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:560. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bobray Bordelon). General contact details of provider: http://edirc.repec.org/data/irprius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.