The Economic Payoff of Immigrant Diversity in Cities: Evidence from Matched Employer-Employee Data

Scientists have long been interested in the relationship between immigration and economic welfare. At the same time, most of the discussion in and out of academia focuses on immigrants as a whole, or in terms of skilled and unskilled immigrants. Much less is known about the costs and benefits of immigrant-spawned diversity: the growing mix of workers born in different countries. This project fills this gap by analyzing the economic significance of immigrant diversity in U.S. metropolitan areas. It will consider how diversity enables interactions among different individuals, generating new, valuable ideas and raising productivity; equally, it will explore whether the challenges of transacting in a highly diverse urban environment can limit cooperation, thereby reducing productivity. In debates over immigration and the culturally complex environments it engenders, it is mostly assumed that foreign-born workers displace natives. Rising diversity is thus cast as a zero-sum game. But this project considers the possibility that workers born in different countries can be complements, not substitutes, with their collective heterogeneity generating economic benefits for all. Findings from this research will help to reframe this issue and improve understanding within academic and policy communities regarding the economic benefits that urban immigrant diversity may engender. This project will build on existing work in geography and economics by examining extremely rich confidential U.S. Census Bureau data that track a vast number of U.S. workers and the establishments in which they work on a quarterly basis between 1992 and 2008. By exploiting changes in worker, firm and city characteristics over time, these data will allow results that are more accurate and more widely generalizable than the current state of knowledge. Moreover, the researchers will consider not just overall effects, but also how diversity may differently affect workers at different skill levels, in different industries, and in different social and policy contexts. This project will also disentangle whether any observed diversity effects come from interactions within firms or in the broader space of the city. In short, the investigators will produce the best available information on the economic implications of immigrant diversity in cities.