Economic research on diversity
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Economic research on diversity






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  • This map refers to 2001

Economic research on diversity Economic research on diversity Presentation Transcript

  • Economic research on diversity: international perspectives
    Jacques Poot
    Professor of Population Economics
    Diversity Research Forum
    Claudelands Event Centre, Hamilton
    Monday 22 August 2011
  • What is the focus of economic research on diversity? (*) = covered in this presentation
    Measurement of diversity (*)
    Wages and employment (*)
    Productivity and innovation (*)
    Consumption and trade (*)
    Segregation and segmentation
  • Diversity has many dimensions
    Research covers: gender, age, ethnicity, birthplace/nationality, disability, sexual orientation, religion
    This presentation focuses on diversity through international migration only
  • Global migrant diversity trends can be measured by a diversity index
    • Just measuring the number of countries of birth present in a nation is not very informative
    • Instead, a simple diversity index calculates:
    1 – sum of the squared shares of each country
    of origin in the population
    • The closer to 1 the diversity index is, the more diverse the population is
  • “Continent of Birth” diversity of the world’s population (including the “host” population)
  • “Continent of Birth” diversity of the world’s population (excluding the “host” population)
  • Socio-economic impacts of international migration and population diversity
    There is a need for a comprehensive multidisciplinary approach: Migration Impact Assessment (MIA)
    MIA is not the same as Cost-Benefit Analysis (CBA)
    MIA is also multi-method: using quan, qual and mixed methods, and meta-analysis
  • A summary: Longhi et al. (2010) in Environment and Planning C – Government and Policy
    Wage and employment impacts of immigration on the host population are almost negligibly small
    Migrants usually ‘complement’ host population work force but are ‘substitutes’ for earlier migrants with similar skills
    Institutions matter: in the US wage effects are bigger than employment effects; in Europe it is the opposite
    Migration ‘greases the wheels’ of the labour market
    Meta-analyses of labour market impacts
  • Impact of diversity on productivity and innovation
    Forbes Insights report August 2011 “Fostering Innovation Through a Diverse Workforce”
    Method: survey of 321 executives of large global enterprises; some in-depth interviews
    Diversity is a key driver of innovation and success on a global scale!
    Competition for ‘talent’ is fierce in today’s global economy
    There has been a lot of progress on gender and ethnic diversity/inclusion, but less on disability and age
  • Diversity and innovation: Research on patent applications
    European data
  • Patent applications per million inhabitants andthe share of foreign residents in 170 NUTS 2 regions in 1991 and 2001
    Positive relationship, but not necessarily linear
    The correlation coefficient increased from 0.33 to 0.48
    The patents pattern is less clustered in 2001
  • Economists are trying hard to solve the causality problem by new techniques:
    Finding ‘instrumental variables’
    Finding ‘counterfactuals’
    Using ‘natural experiments’
    Using policy-linked randomization
    In the case of diversity and innovation research, we found an interesting ‘instrument’
    Does correlation imply causation?
  • EU12 NUTS2 regions | Obs Mean Std. Dev. Min Max
    McDonald’s (number) | 340 26.95882 24.74134 0 189
    Per million population | 340 13.49947 7.086818 0 33.6
    Other instruments: the presence of a capital city; the area of the region
  • Impact of diversity on patent applications in Europe
    An increase in the diversity index by 0.1 from the regional mean of 0.5 increases patent applications per million inhabitants by about 0.2 percent!
  • From macro to micro: Dutch data on innovation
    This study combines 4 confidential high-quality firm/individual level micro-datasets obtained from Statistics Netherlands.
    Social Statistics Survey (SSB_Banen - REOS) – 10 million obs.
    Community Innovation Survey (CIS 3.5), (Survey + Census of firms with >100 empl.)
    10 000 obs.
    Dutch Labour Force Survey (EBB) – 83 000 obs.
    Dutch Municipality registrations (GBA) – 16 million obs.
    CIS: is a regular snapshot of infrastructure /inputs /outputs /obstacles of innovation by firms
    EBB: is a regular screening of labour market and employees on household /ethnicity /country of birth /job situation /education /trade union /commuting
  • Results from the analysis of Dutch data
    “Solving” the causality problem with instruments for predicting predict the share of foreign born in the firm in 2002:
    the number of foreign restaurants per 10 000 municipality population
    the migrant population stock in 1996
    Main conclusion: Employing more migrants does not boost innovation, but, among those firms that hire skilled immigrants, greater diversity of the foreign workers enhances product innovation!
  • Channels through which immigrants influence trade
    Population growth through migration increases aggregate demand: increases imports
    Immigrants have a preference for home country products (ethnic goods and services): increases imports
    However, once demand is large enough, firms may produce home country goods locally: lowers imports
    If immigrants contribute to making firms more efficient, international competitiveness increases: increases exports, lowers imports
    Migrant networks reduce transaction costs through better information exchange, facilitating communication in foreign language, enhanced trust in trading relationship, enforceability of contracts: increases both imports and exports
    • Migrant networks are important for both the host country (immigrants) and the home country (diaspora/expats)
  • Meta-analysis of the impact of immigration on international trade
    There have been 48 studies since the 1990s that yielded more than 200 estimates
    All studies use the same theory: the ‘gravity model’ of trade
    Each study reports the % change in trade when the number of immigrants in the population increases by 1%
  • Estimates around the world
  • An increase in the number of immigrants by 10 percent increases the volume of trade by about 1-2 percent.
    The impact is lower for trade in homogeneous goods.
    The migrant impact on imports is on average similar to that of exports.
    The migrant impact appears to be greater for migration between countries of different levels of development.
    Broad conclusions of the trade meta-analysis
  • Relevance of this MIA research for New Zealand
    MIA suggests generally positive or neutral economic impacts
    However, old myths die hard!
    NZ, Australian and Canadian policies are generally seen as better than elsewhere, consequently:
    (1) are expected to yield even better impacts
    (2) are become ‘role model’ for policy development
  • Hodgson and Poot (2010) New Zealand Research on the Economic Impacts of Immigration 2005–2010 - Synthesis and research agenda. Download from
    Nijkamp, Poot and Sahin (eds.) (2012) Migration Impact Assessment: New Horizons. Edward Elgar.
    Interested in more details?
  • Thank you!