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Living Apart Together: The Economic Value of Ethnic Diversity in Cities

Author

Listed:
  • Jessie Bakens

    () (Maastricht University, The Netherlands)

  • Raymond Florax

    (Purdue University, USA; Vrije Universiteit Amsterdam, The Netherlands)

  • Henri (H.L.F.) de Groot

    () (Vrije Universiteit Amsterdam, The Netherlands)

  • Peter Mulder

    () (Vrije Universiteit Amsterdam, The Netherlands)

Abstract

In consumer cities, the presence and location of immigrants impacts house prices through two channels, which both can be valued positively as well as negatively: (i) their presence and contribution to population diversity and (ii) the creation of immigrant-induced consumer amenities like those associated with ethnic restaurants in terms of both quantity as well as diversity. We hypothesize that these two mechanisms create a trade-off in which city dwellers want to live apart yet consume together. We derive a simple intra-city residential location model in which distance to immigrant amenities and the immigrant population in neighborhoods contribute to the explanation of differences in house prices. We use unique micro data of house prices and ethnic restaurants in the city of Amsterdam over the 1996-2011 period to estimate the trade-off between consumers' love for ethnic goods and its variety on the one hand, and ethnic residential composition on the other hand. Our results show the existence of a trade-off in which access to ethnic restaurants compensates for the negative effect of the presence of immigrants on house prices. Diversity of immigrant-induced amenities has an additional positive effect on house prices.

Suggested Citation

  • Jessie Bakens & Raymond Florax & Henri (H.L.F.) de Groot & Peter Mulder, 2018. "Living Apart Together: The Economic Value of Ethnic Diversity in Cities," Tinbergen Institute Discussion Papers 18-029/VIII, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20180029
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    References listed on IDEAS

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    Cited by:

    1. Bill Cochrane & Jacques Poot, 2019. "The Effects of Immigration on Local Housing Markets," Working Papers in Economics 19/07, University of Waikato.

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    More about this item

    Keywords

    amenities; diversity; immigrants; hedonic pricing; propensity score matching;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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