The Costs of Adapting to a New Cultural Environment: Examining Immigrants' Outcomes

Abstract

This paper investigates the consequences of a change in cultural environment. Because any given cultural environment changes very slowly, I address this topic by examining immigrants' socio-economic outcomes. Using variation in the cultural distance between immigrants' birth and host countries and individual-level data from Europe and the US, I find that an increase of one standard deviation in cultural distance decreases an immigrant’s expected weekly earnings by 7.2%. As expected, the effect is stronger for more recent immigrants, immigrants who moved when they were older, more educated immigrants, immigrants coming from less globalized countries, and first generation immigrants. By controlling for selection into emigration and selection of destination, I show that these results are not sensitive to endogenous migration decisions of those who immigrate. Furthermore, greater cultural distance increases immigrants' crime rates, lowers immigrants' interest in the host-country's political life and their knowledge of its language, leads to lower trust in political and legal institutions of the host country and worsens health outcomes. Despite globalization, this negative effect of cultural distance has been increasing over time and it even affects native workers who move to another cultural region within the same country.

Keywords: cultural change, immigrants’ labor market outcomes, immigrants’ social outcomes, cultural persistence

JEL Classification: D60, F22, J61