Working Paper: CEPR ID: DP4438
Authors: Gianmarco I.P. Ottaviano; Giovanni Peri
Abstract: We investigate the existence of wage premium due to cultural diversity across US cities. Using census data from 1970 to 1990, we find that at the urban level richer diversity is systematically associated with higher average nominal wages for white US-born males. We measure cultural diversity in a city using the variety of languages spoken by city-residents. While the positive correlation between wages and diversity survives a battery of robustness checks, it seems to be larger once foreign cultures have been assimilated. Finally, instrumental variable estimation hints at causation going from diversity to wages. Comparing real and nominal wages across cities, we interpret these results as evidence that diversity enhances productivity.
Keywords: Cultural diversity; Metropolitan areas; Productivity; Wages
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 |
|---|---|
| cultural diversity (Z10) | higher average nominal wages (J31) |
| linguistic diversity (J15) | productivity (O49) |
| cultural diversity (Z10) | productivity (O49) |
| cultural diversity (Z10) | diversity wage premium (J31) |
| linguistic diversity (J15) | higher average nominal wages (J31) |