Working Paper: CEPR ID: DP4233
Authors: Gianmarco I.P. Ottaviano; Giovanni Peri
Abstract: We use data on wages and rents in different US cities to assess the amenity effects on production and consumption of cultural diversity as measured by diversity of countries of birth of city residents. We show that US-born citizens living in metropolitan areas where the share of foreign-born increased between 1970 and 1990 have experienced a significant average increase in their wage and in the rental price of their housing. Such finding is economically significant and robust to omitted variable bias and endogeneity bias. We then present a model in which cultural diversity may have both production and consumption amenity or disamenity effects. As people and firms are mobile across cities in the long run, the model implies that the joint results from the wage and rent regressions are consistent with a dominant production amenity effect of cultural diversity.
Keywords: Cultural diversity; Local amenities; Productivity; Urban economics
JEL Codes: F10; O40; R00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in the share of foreign-born residents (J11) | production amenity effect for U.S.-born workers (J69) |
| cultural diversity enhances local economic conditions (Z10) | higher wages and rents (J39) |
| increase in the share of foreign-born residents (J11) | higher wages for U.S.-born workers (J39) |
| increase in the share of foreign-born residents (J11) | higher rents (R21) |