ECONOMIC IMPACTS OF CULTURAL DIVERSITY IN THE NETHERLANDS: PRODUCTIVITY, UTILITY, AND SORTING

Authors


  • The authors would like to thank for useful comments on earlier versions of this paper two anonymous referees of this journal, as well as Raymond Florax, Thomas de Graaff, Henri de Groot, Suzanne Kok, Gianmarco Ottaviano, Giovanni Peri, Jacques Poot, Brigitte Waldorf, and participants of the Immigration Workshop held at the FED Chicago 2011, the NIDEA workshop held at the University of Waikato 2012, and the IEB workshop on Urban Economics held in Barcelona 2012. Financial support from NORFACE research program on Migration in Europe—Social, Economic, Cultural, and Policy Dynamics is acknowledged. The authors like to thank NVM and Statistics Netherlands for providing data. All remaining errors are ours.

Abstract

ABSTRACT This paper identifies the impact of cultural diversity on local economies, by explaining spatial disparities in wages and housing prices across Dutch cities using unique individual panel data of homeowners during the period 1999 and 2008. We distinguish between the effects of spatial sorting based on individual heterogeneity, interactions-based productivity effects, and consumer amenities while controlling for interactions between the labor and housing market. In line with previous literature, we find a positive effect of cultural diversity on average housing prices. After controlling for spatial sorting, the effect of cultural diversity on housing prices is negative. The negative impact of cultural diversity on local housing markets is likely driven by a causal effect between the presence of immigrants and neighborhood quality that outweighs a positive effect of immigrant-induced diversity in consumption goods.

Ancillary