Abstract
Because of an inflow of people into the EU but also because of the freedom of workplace choice within the EU, European regions are becoming more diverse in cultural terms. Despite the redistribution of labour and changes in regional labour supply, the ultimate question raised is whether there are additional gains or losses as a result of immigration flows. This paper therefore focuses on the impact of migrants on regional Gross Domestic Product per capita for European regions. Does the proportion of foreigners in the labour force increase or lower regional income? Does the composition of non-natives with respect to their countries of origin matter? We provide evidence that immigration and a higher degree of cultural diversity raise regional income, while controlling for endogeneity. We show that cultural diversity promotes income gains for destination countries. Whereas the presence of dominant groups reduces the costs of interaction and integration, diversity among foreign-born people increases the supply of different skills, knowledge and tasks. Thus, in general immigration has a positive net effect on regional performance and the costs of immigration in destination regions are balanced out. The regions of origin within the EU face a rise or a decline in income, depending on the labour market status of movers.
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Notes
School enrolment rates or the number of students in higher education are frequently applied to represent investment in new human capital.
In Table 5 we provide information, whether the data source for computing the investment rate is Cambridge Econometrics or Eurostat.
This is especially the case for Germany.
We still include respondents over the age of 65 who are active in the labour market.
The exception to this are the Baltic countries, where due to the Soviet history of these countries many Russians reside there.
The reference year for the dummy estimates is 2004.
The weight is computed as follows: \(w_{kr}=\exp \left( -\phi d_{kr}\right) ; \phi =-\ln\left[ \left( 1-\gamma \right) /D\right]\). The distance-decay parameter is γ = 0.5, which means that the proportion of migrants in the average neighbouring region (D = 167.24 km) enters with half of the original value. We standardize the weights so that the sum across all regions equals 1. In this case a weighted average of the proportion of migrants in all of the surrounding regions results.
We use the STATA xtivreg2 package, provided by Schaffer (2010).
With regard to immigration, the change in income is defined as \(dy/y=\beta \ast d\left( s_{migrants}^{r}\right),\) ceteris paribus.
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Acknowledgments
This research is funded by the NORFACE research funding agency and part ofthe MIDI-REDIE sub-project, which we gratefully acknowledge. We would liketo thank two anonymous referees, Peter Huber (Wifo Vienna), the participantsof the 4th Wifo workshop in Vienna and the MIDI-REDIE workshop inTartu/Estonia for helpful comments and suggestions on earlier versions of this work.
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Brunow, S., Brenzel, H. The effect of a culturally diverse labour supply on regional income in the EU. Empirica 39, 461–485 (2012). https://doi.org/10.1007/s10663-012-9201-z
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DOI: https://doi.org/10.1007/s10663-012-9201-z