Economic Impacts of Cultural Diversity in the Netherlands: Productivity, Utility, and Sorting Hamilton, April 2012 Jessie Bakens, Peter Mulder, Peter Nijkamp.

Economic Impacts of Cultural Diversity in the Netherlands:

Productivity, Utility, and Sorting

Hamilton, April 2012

Jessie Bakens, Peter Mulder, Peter NijkampVU University AmsterdamDepartment of Spatial Economics

Average resultsVariables ln(wage) ln(housing price)

I (all cities)

II (largest )

I(all cities)

II(largest )

Diversity index 0.01 (0.31) 0.89**(0.33)

3.07***(0.37) 2.96***(0.83)

Share of high-educated 5.15***(0.39)

4.92***(0.57)

ln(no jobs in 45 minutes)

1.25***(0.16)

0.54**(0.23)

ln(income per resident) 1.09***(0.06) 0.89***(0.16)

No of observations 176 25 176 25

R2 0.46 0.76 0.61 0.78***significant at 1%, ** at 5%, * at 10%. Heteroskedasticity‐robust standard error in parentheses.Source: own calculations based on CBS(GBA, SSB), NVM, ABF‐Real Estate monitor.

But……….

• Assumption of homogeneous agents

• No role for sorting: spatial selection based on heterogeneous characteristics of residents

• Parallel labour and housing markets

• No role for local amenities

Data

• Dutch micro panel-data

• Transaction costs houses (1999-2008)

• Owner/worker characteristics

• Firm characteristics

• Amenities (cultural and other)

• 126,959 observations (of 61,738 individuals)

Research Question

•What is the effect of cultural diversity on productivity and utility of Dutch residents?

Identification strategy step IFramework inspired by Combes et al. (2008)*

• Wage equation (1):

• Housing price equation (2):

*Combes, P., G. Duranton and L. Gobillon (2008). Spatial Wage Disparities: Sorting Matters!, Journal of Urban Economics, no. 63, pp. 723-742.

Variance decomposition (1): resultsEffect labour market

St. Dev. Correlation with ln(wage)

Residuals 0.15 0.37

Individual effects 0.37 0.89

Age effect 0.36 0.34

Sector effect 0.04 0.11

Sector-age effect 0.01 -0.01

Area-year effect 0.04 -0.07

Variance decomposition (2): resultsEffect housing market

St. Dev. Correlation with ln(housing price)

Residuals 0.13 0.43

Individual effects 0.25 0.82

Age effect 0.35 0.19

Maintenance inside outside

0.020.01

0.080.1

Pre-1930 construction 0.01 0.16

House type 0.05 0.28

Area-year effect 0.16 0.50

Identification strategy step II• Labour market area-effect (wage residuals) (3):

• Housing market area-effect (housing price residuals) (4):

Results step IIVariables Area-year effect

labour marketArea-year effect housing market

Area-year effect labour market

-0.25*** (0.07)

Area-year effect housing market

-0.06*** (0.02)

Diversity index 0.03 (0.03) -0.31*** (0.04)

Share of high-educated 0.03 (0.05) 0.79*** (0.07)

ln(no jobs in 45 minutes) 0.16*** (0.01)

ln(population ) -0.01*** (0.004)

Historic centre 0.01 (0.01) 0.07*** (0.02)

Year dummies Yes Yes

No of observations 689 689

R2 0.33 0.67

***significant at 1%, ** at 5%, * at 10%. Heteroskedasticity‐robust standard error in parentheses.Source: own calculations based on CBS(GBA, SSB), NVM, ABF‐Real Estate monitor.

Results step II cont’d Variables Area-year effect housing market

Model I Model II Model III Model IV

labour market -0.25*** (0.07)

-0.21*** (0.07) -0.23*** (0.07)

-0.20*** (0.07)

Diversity index -0.31*** (0.04) 1.05*** (0.32) -0.38** (0.05) -0.09 (0.06)

QoL index 0.13*** (0.02) 0.07*** (0.01)

Interaction term -0.21*** (0.06)

Restaurant ind’tor

0.08*** (0.02) 0.10*** (0.02)

Share of high-educated

0.79*** (0.07) 0.67*** (0.07) 0.71*** (0.07) 0.51*** (0.07)

ln(no jobs in 45 minutes)

0.16*** (0.01) 0.15*** (0.01) 0.17*** (0.01) 0.16*** (0.01)

Historic centre 0.07*** (0.02) 0.05*** (0.01) 0.05*** (0.01) 0.03** (0.02)

Year dummies Yes Yes Yes Yes

No of observations

689 689 689 689

R2 0.67 0.70 0.68 0.71***significant at 1%, ** at 5%, * at 10%. Heteroskedasticity‐robust standard error in parentheses.Source: own calculations based on CBS(GBA, SSB), NVM, ABF‐Real Estate monitor.

Conclusions

• Cultural diversity impacts productivity and utility mainly through sorting. How does this black-box work: Creative class likes multi-culti environment?

• In the housing market, area characteristics also matter

▫Negative effect of cultural diversity on rent residuals

▫Socio-economic effects outweigh migrant induced amenities

Future research

Acknowledgement• Financial support from NORFACE research programme

(MIDI-REDIE project) on Migration in Europe - Social, Economic, Cultural and Policy Dynamics, is acknowledged.

• The data on housing prices used in this research is provided by the Dutch association of real estate agencies: de Nederlandse Vereniging van Makelaars o.g. en vastgoeddeskundigen NVM.

• CBS (Statistics Netherlands) provided data on Dutch residents and firms.

• Ministry of Internal Affairs provided data from the Quality of Living index (Leefbaarometer).

Thank you for your attention!

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