Urban Immigrant Diversity and Inclusive Institutions

38 Pages Posted: 27 Jan 2016

See all articles by Abigail Cooke

Abigail Cooke

State University of New York (SUNY) - Buffalo

Thomas Kemney

University of Southampton

Date Written: January 01, 2016

Abstract

Recent evidence suggests that rising immigrant diversity in cities offers economic benefits, including improved innovation, entrepreneurship and productivity. One potentially important but underexplored dimension of this relationship is how local institutional context shapes the benefits firms and workers receive from the diversity in their midst. Theory suggests that institutions can make it less costly for diverse workers to transact, thereby catalyzing the latent benefits of heterogeneity. This paper tests the hypothesis that the effects of immigrant diversity on productivity will be stronger in locations featuring more "inclusive" institutions. It leverages comprehensive longitudinal linked employer-employee data for the U.S. and two distinct measures of inclusive institutions at the metropolitan area level: social capital and pro- or anti-immigrant ordinances. Findings confirm the importance of institutional context: in cities with low levels of inclusive institutions, the benefits of diversity are modest and in some cases statistically insignificant; in cities with high levels of inclusive institutions, the benefits of immigrant diversity are positive, significant, and substantial. Moreover, natives residing in cities that have enacted laws restricting immigrants enjoy no diversity spillovers whatsoever, while immigrants in these cities continue to receive a diversity bonus. These results confirm the economic significance of urban immigrant diversity, while suggesting the importance of local social and economic institutions.

Suggested Citation

Cooke, Abigail and Kemney, Thomas, Urban Immigrant Diversity and Inclusive Institutions (January 01, 2016). US Census Bureau Center for Economic Studies Paper No. CES-WP- 16-07. Available at SSRN: https://ssrn.com/abstract=2722511 or http://dx.doi.org/10.2139/ssrn.2722511

Abigail Cooke

State University of New York (SUNY) - Buffalo

12 Capen Hall
Buffalo, NY 14222
United States

Thomas Kemney (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

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