Template-Type: ReDIF-Paper 1.0
Author-Name: David C. Maré
Author-X-Name-First: David
Author-X-Name-Last: Maré
Author-Email: dave.mare@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Author-Name: Jacques Poot
Author-X-Name-First: Jacques
Author-X-Name-Last: Poot
Author-Email: h.j.poot@vu.nl
Author-Workplace-Name: Vrije Universiteit
Title: Valuing cultural diversity of cities
Abstract: This paper revisits whether cultural diversity is a source of local production and/or consumption amenities. We adapt the analytical framework of Roback (1982, 1988) and Chen & Rosenthal (2008) to estimate the impact of cultural diversity on city wage and rent premiums from hedonic regressions.  We focus on New Zealand which – with high residential mobility and ease of setting up business – is particularly suited to this framework. Additionally, our estimates are based on a very large data set: complete unit record census data on individuals and dwellings in 110 urban areas spanning 32 years.  Controlling for observed and unobserved city characteristics, and for the potential endogeneity of diversity, we find that cultural diversity serves as a local positive production amenity and a weakly negative consumption amenity. The results are mostly robust to measuring cultural diversity by birthplace, ethnicity or religion; and to using a range of measures of diversity. We conclude that the presence of people from different cultural backgrounds enhances the profitability of urban firms.  In contrast, a city’s population has a weak preference for living near others who are culturally similar to them. The effects are stronger in larger cities.
Length: 50 pages
Creation-Date: 2019-10
File-URL: https://motu-www.motu.org.nz/wpapers/19_05.pdf
Number: 19_05
Classification-JEL: J31, R21, R23, R31
Keywords: Diversity; fractionalisation; local amenity; urban wages and rents; hedonic regression 
Handle: RePEc:mtu:wpaper:19_05