The economics of cultural diversity: recent findings Professor - PowerPoint PPT Presentation

The economics of cultural diversity: recent findings Professor Jacques Poot National Institute of Demographic and Economic Analysis University of Waikato

The current research team • • Paul Spoonley J acques Poot • Natalie J ackson • Tahu Kukutai • Robin Peace • Dave M aré (also M otu) • M alakai Koloamatangi • Lars Brabyn • J ia Ye • M ichael Cameron • J essica Terruhn • • Ben Soltani M atthew Roskruge • M arlene Levine • Tristan M cHardie • Geoff Stone • Renae Dixon • J ulie Taylor

Three Research Themes Ethno-Demographic Diversity (EDD) Societal Impact and Opportunities (SIO) Institutional Implications and Responsiveness (IIR)

20 projects 2014-2020 plus a final synthesis M eta-review & Synthesis in ebook

European research on the economics of cultural diversity M IDI-REDIE: M igrant Diversity and Regional Disparity in Europe Part of: NORFACE Research Programme on M igration (2009-2013) http:/ / www.norface-migration.org/

Outline • Defining and measuring cultural diversity • Theoretical perspectives • Evidence on impacts on – Innovation and growth – International trade – Social capital • Summing up

What is cultural diversity? • The extent of cultural differences among members within a social unit along a range of dimensions • National cultural identity? (Geert Hofstede) • Objective or subjective • High dimensional • Commonly approximated by readily observed indicators from censuses and surveys: – Country/ region of birth; race/ancestry; self-declared ethnicity; languages spoken; religion; citizenship, etc. • M any measures and techniques are available to summarise the available data

M easurement of cultural diversity • Auckland, 2013 census • M any measures, – Population 1.5 million originating from a wide – 39.1% born outside NZ range of disciplines – 230 ethnic groups • “ M arket leaders” – 40.7% did NOT state any – Diverse groups: European ethnicity Fractionalization index • London, 2011 census – Diverse places: – Population 8.1 million Segregation index • – 37.0% born outside UK Results from empirical – 300 languages spoken research are sensitive to the choice of measure – 36.7% did NOT state any European ethnicity Which is the more diverse city?

A national barometer of ethnic diversity Diversity Index 0.6 0.55 0.5 0.45 Ethnic Fractions 0.4 Racial Fractions 0.35 “ New Zealander” Added as 0.3 Ethnic Group 0.25 Identity 0.2 With M ultiple 0.15 Ethnicities 0.1 0.05 0 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016

Birthplace and ethnic diversity among New Zealand Territorial Authorities, 2013

Birthplace and ethnic diversity among Auckland Local Board Areas, 2013

Super(-)diversity “Around the world over the past three decades, there have been increasing movements of people from more varied national, ethnic, linguistic and religious backgrounds; in addition, there has been a diversification of migration channels, legal statuses and conditions, gender and age ratios and forms of human capital” (Steven Vertovec, Super-Diversity , R outledge, 2015) First applied in the New Zealand context by P aul Spoonley Steven Vertovec http:/ / wol.iza.org/ articles/ superdiversity-social-cohesion-and- M ax Planck Institute for economic-benefits the Study of Religious and Ethnic Diversity Göttingen, Germany Since last year given a lot of public exposure in NZ through the Superdiversity Centre for Law, P olicy and Business, led by Mai Chen http:/ / www.superdiversity.org/

Diversity in Auckland in 2013 across multiple domains: ethnicity, qualifications, religion, income, age, language Source: DC M aré, M arch 2015

Other ways of quantifying diversity • There are many measures but some of these are highly correlated • Six interesting “group diversity” measures: – The Shannon-Weaver information measure (SW) – The importance of the minorities index (FR1) – Diversity among minorities index (FR2) – The fractionalization index (FR = FR1 + FR2) – The Hoover index (HO) – The Reynal-Querol polarization index (RQ) • All measures can be group-weighted by cultural distance, but this is uncommon to date

Correlation of diversity measures across Auckland Area Units, 2013 census _eth 0 .5 1 0 .5 0 .5 1 0 .5 1 0 .5 1 .8 .6 Hoover Index .4 .2 1 .5 Reynal_Querol 0 .5 Majority Fractionalisation 0 .5 Within Minority Fractionalisation 0 1.5 Shannon-Weiner 1 Entropy .5 1 Simpson .5 diversity 0 .5 Evenness Index 0 1 Fractionalisation .5 (Herfindahl) 0 .8 Shannon .6 Evenness Index .4 .2 1 Standardised .5 Fractionalisation 0 .2 .4 .6 .8 0 .5 .5 1 1.5 0 .5 .2 .4 .6 .8 Source: DC M aré, M arch 2015

Economic impacts of cultural diversity: inspiring work on benefits… and costs

Economic benefits of boosting cultural diversity through immigration • Population growth triggers a greater rate of gross fixed capital formation • Stronger agglomeration forces (more learning, sharing, matching) • Youthfulness of immigrants; leads to greater labour mobility and labour market flexibility • Positive self-selection of immigrants • Greater variety of output and trade; ethnic precincts • The “strength of weak ties”: bridging social capital

Some negative impacts of boosting cultural diversity through immigration • Greater (cheaper) labour intensity of production lowers innovation incentives • Greater “fractionalization” which reduces accumulation of – Public capital – Social capital (networks, trust, participation) • Addressing fractionalization in workplaces and educational institutions may require costly interventions • Increasing “sorting” and spatial segregation • Polarization of social capital (more “bonding”, less “bridging”) • Political polarization and instability may lead to greater uncertainty in the business environment

The he vi view of of mul multina nationa onal comp ompani nies RBES | FORBE Ins Insight hts : : “A di diver erse e and nd i inc nclus usive wor workfor orce is c cruc ucial t to o enc ncour ouraging ng di differ fferen ent per perspec pectives es and d idea deas th that d t dri rive innov nnovation” on” So Source: e: F Forbes bes, 2011 See also e.g. : Hunt et al. (2015) Diversity M atters , M cKinsey & Company. More ge generally ly, a strong convic viction ion o of “posit itiv ive e externalit litie ies” of f diversi sity; y; In any case se, there a are also so i imp mportant eq equi uity consid ideration ions; But ut t ther here i is also “d “diversity f fatigue” (The E he Eco conomist, 13 13 Feb Feb 201 2016)

From theory to evidence • Studies have used observational data from cross- country level down to surveys and in-depth interviews at the firm level • Most research links observed economic outcomes with some observed immigration or diversity measures, thereby only identifying the net effect • Investigating positive and negative channels one by one remains a challenge for current research • Several parallel non-interacting literatures

Syntheses of the evidence to date Ozgen et al. in International Migration Review , 2014 Nathan in Journal of Economic Geography, 2014 Kemeny in International Regional Science Review, 2014 • Major differences between North-American and E uropean literatures – E U and NZ: emphasis on regions or firms – US: emphasis on regions or graduate students and researchers • Many inconclusive results but still, on balance, positive effects of cultural diversity on patent applications and innovation • Cultural diversity matters, but is of relatively less importance for innovation than e.g. business size and industry • Many studies have not been able to adequately address the difficult issue of reverse causality

M acro-level evidence: cultural diversity and patent applications in European regions Source: Ozgen C, Nijkamp P and Poot J (2012) “ Immigration and Innovation in European Regions”. In: Nijkamp P , Poot J and Sahin M (eds.) M igration Impact Assessment: New Horizons . Cheltenham UK: Edward Elgar, pp. 261-298.

Back to NZ: descriptive evidence on migrant shares in areas and innovation . Source : Maré, Fabling & Stillman (2010); see also Papers in Regional Science 93(1), 2014 .6 .6 New Operational Processes New Goods and Services .4 .4 .2 .2 0 0 .1 .2 .3 .4 .5 .1 .2 .3 .4 .5 Percent Migrants Percent Migrants a) New goods and services b) New operational processes .6 New Organisational & Managerial .6 Any Innovation .4 .4 .2 .2 0 .1 .2 .3 .4 .5 Percent Migrants 0 .1 .2 .3 .4 .5 Percent Migrants c) Any innovation in past year d) Organisational and managerial innovation Recent update: M cLeod, Fabling & M aré (2014) Hiring New Ideas: International M igration and Firm Innovation in NZ , M otu WP 14-14. Considers migrant shares within firm