Tuesday, March 7th, 2017 Cities, Immigrant Diversity and Complex Problem Solving

Description

Cities play host to residents hailing from a wide range of countries. Theory suggests such immigrant diversity can influence worker productivity, both positively and negatively. Benefits flow from the idea that people born in different countries complement each other in problem solving and innovation, by enabling the combination of different skills, ideas and perspectives. But heterogeneity can also inhibit productivity by raising the costs of co-operation and spurring rent-seeking behavior. This project makes several contributions to a growing body of empirical work exploring these claims. First, it leverages a rich matched employer-employee dataset for the U.S. that enables us to better account for bias from non-random worker selection, while distinguishing between impacts flowing from diversity manifested at city- and workplace-scales. Second, we ‘stress-test’ motivating theory, examining the extent to which any benefits from diversity are concentrated among workers engaged in complex problem solving and innovation. Results suggest that the benefits of immigrant diversity outweigh the costs. Consistent with theory, the association is concentrated among workers engaged in industries where complex problem solving is particularly important. In light of continued controversy about the economic implications of immigration, this project suggests an additional channel by which immigration improves overall economic well-being.