The Economic Value of Cultural Diversity: Evidence from U.S. Cities

Innovation and Economic Growth

Article Snapshot

Author(s)

Gianmarco I.P. Ottaviano and Giovanni Peri

Source

Journal of Economic Geography, Vol. 6:1, pp. 9-44, 2006

Summary

U.S. cities that attracted immigrants experienced a significant increase in average wages and in housing values.

Policy Relevance

Cities that implement immigration-friendly policies, as a way of attracting a variety of skills and highly educated immigrants, benefit from productivity increases at the local level and experience increases in housing values.

Main Points

  • This paper documents strong correlation: U.S.-born citizens living in metropolitan areas where the share of foreign-born increased between 1970 and 1990 experienced a significant increase in their wages and in the rental price of their housing.
     
  • As people and firms are mobile across cities in the long run, these correlations are consistent with a net positive effect of cultural diversity on the productivity of natives.
     
  • Cities with a more diverse set of skills are more productive, generate more jobs, and are more attractive to people who move there, resulting in a rise in the value of houses.

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