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Spillovers from Immigrant Diversity in Cities

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November 2015

Written by: Thomas Kemeny, Abigail Cooke

Working Paper Number:

CES-15-37

Abstract

Using comprehensive longitudinal matched employer-employee data for the U.S., this paper provides new evidence on the relationship between productivity and immigration spawned urban diversity. Existing empirical work has uncovered a robust positive correlation between productivity and immigrant diversity, supporting theory suggesting that diversity acts as a local public good that makes workers more productive by enlarging the pool of knowledge available to them, as well as by fostering opportunities for them to recombine ideas to generate novelty. This paper makes several empirical and conceptual contributions. First, it improves on existing empirical work by addressing various sources of potential bias, especially from unobserved heterogeneity among individuals, work establishments, and cities. Second, it augments identification by using longitudinal data that permits examination of how diversity and productivity co-move. Third, the paper seeks to reveal whether diversity acts upon productivity chiefly at the scale of the city or the workplace. Findings confirm that urban immigrant diversity produces positive and nontrivial spillovers for U.S. workers. This social return represents a distinct channel through which immigration generates broad-based economic benefits.

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exogeneity, endogeneity, employ, ethnicity, ethnic, establishment, specialization, heterogeneity, immigrant, workplace, workforce, immigration, migrant, relocate, immigrant workers, refugee

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National Science Foundation, Center for Economic Studies, Total Factor Productivity, Decennial Census, Generalized Method of Moments, North American Industry Classification System, American Community Survey, National Institute on Aging, Alfred P Sloan Foundation, Longitudinal Employer Household Dynamics, Employer-Household Dynamics, Employment History File, Employer Characteristics File, Individual Characteristics File, Quarterly Workforce Indicators, Special Sworn Status, Core Based Statistical Area, Integrated Public Use Microdata Series

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