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Journal of Economic Geography Advance Access originally published online on June 22, 2005
Journal of Economic Geography 2006 6(1):9-44; doi:10.1093/jeg/lbi002
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© The Author (2006). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

The economic value of cultural diversity: evidence from US cities

Gianmarco I.P. Ottaviano* and Giovanni Peri**

* Department of Economics, University of Bologna, Strada Maggiore 45, 40125 Bologna, Italy, FEEM and CEPR. email <ottavian{at}economia.unibo.it>
** Giovanni Peri, UCLA International Institute, 10266 Bunche Hall, UCLA, Los Angeles, CA 90024 USA, University of California, Davis and NBER. email <gperi{at}international.ucla.edu>

What are the economic consequences to U.S. natives of the growing diversity of American cities? Is their productivity or utility affected by cultural diversity as measured by diversity of countries of birth of U.S. residents? We document in this paper a very robust correlation: US-born citizens living in metropolitan areas where the share of foreign-born increased between 1970 and 1990, experienced a significant increase in their wage and in the rental price of their housing. Such finding is economically significant and survives omitted variable bias and endogeneity bias. As people and firms are mobile across cities in the long run we argue that, in equilibrium, these correlations are consistent with a net positive effect of cultural diversity on the productivity of natives.

Keywords: cultural diversity, immigrants, productivity, local amenities, urban economics,
JEL classifications: O4, R0, F1, O18
Date submitted: 7 September 2004     Date accepted: 20 April 2005


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