Valuing cultural diversity of cities

David Maré and Jacques Poot

No 19_05, Working Papers from Motu Economic and Public Policy Research

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.

Keywords: Diversity; fractionalisation; local amenity; urban wages and rents; hedonic regression (search for similar items in EconPapers)
JEL-codes: J31 R21 R23 R31 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2019-10
New Economics Papers: this item is included in nep-cul, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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