Ethnic Diversity and Preferences for Redistribution

35 Pages Posted: 6 Aug 2014

See all articles by Matz Dahlberg

Matz Dahlberg

Uppsala University

Karin Edmark

Research Institute of Industrial Economics

Heléne Lundqvist

Department of Economics, Stockholm University

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Date Written: January 17, 2011

Abstract

In recent decades, the immigration of workers and refugees to Europe has increased substantially, and the composition of the population in many countries has consequently become much more heterogeneous in terms of ethnic background. If people exhibit in-group bias in the sense of being more altruistic to one's own kind, such increased heterogeneity will lead to reduced support for redistribution among natives. This paper exploits a nationwide program placing refugees in municipalities throughout Sweden during the period 1985-94 to isolate exogenous variation in immigrant shares. We match data on refugee placement to panel survey data on inhabitants of the receiving municipalities to estimate the causal effects of increased immigrant shares on preferences for redistribution. The results show that a larger immigrant population leads to less support for redistribution in the form of preferred social benefit levels. This reduction in support is especially pronounced for respondents with high income and wealth. We also establish that OLS estimators that do not properly deal with endogeneity problems -- as in earlier studies -- are likely to yield positively biased (i.e., less negative) effects of ethnic heterogeneity on preferences for redistribution.

Keywords: Income redistribution, ethnic heterogeneity, immigration

JEL Classification: D31, D64, I3, Z13

Suggested Citation

Dahlberg, Matz and Edmark, Karin and Lundqvist, Heléne, Ethnic Diversity and Preferences for Redistribution (January 17, 2011). IFN Working Paper No. 860, Available at SSRN: https://ssrn.com/abstract=2476290

Matz Dahlberg

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

Karin Edmark (Contact Author)

Research Institute of Industrial Economics ( email )

Box 55665
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se\karine

Heléne Lundqvist

Department of Economics, Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

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