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Cultural Diversity and Economic Performance: Evidence from European Regions

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Geography, Institutions and Regional Economic Performance

Part of the book series: Advances in Spatial Science ((ADVSPATIAL))

Abstract

We investigate the relationship between diversity and productivity in Europe using an original dataset that covers the NUTS three regions of 12 European countries. In so doing, we follow the empirical methodology developed by Ottaviano and Peri (J Econ Geogr 6:9–44, 2006). The main idea is that, as cultural diversity may affect both production and consumption through positive or negative externalities, the estimation of both price and income equations is needed to identify the dominant effect. Based on this methodology, we find that diversity is positively correlated with productivity. IV estimates confirm the results, suggesting that causation runs from the former to the latter.

JEL code: R11, R12, O52

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Notes

  1. 1.

    Apart from cultural diversity, culture per se, in the form of social capital, has proven to be an important driver of economic activity at the regional level, as Crescenzi et al. (2013) discuss in chapter The ‘Bright’ Side of Social Capital: How ’Bridging’ Makes Italian Provinces More Innovative.

  2. 2.

    For a theoretical model on the interplay between cultural diversity and urban economics, see Ottaviano and Prarolo (2009).

  3. 3.

    Easterly and Levine (1997) use a fractionalisation index of diversity calculated from the Atlas Narodov Mira (1964).

  4. 4.

    The dataset has been developed at Fondazione Eni Enrico Mattei with support from the European Commission, 6th RTD Framework Programme, Contract no SSP1-CT-2003–502491 (PICTURE).

  5. 5.

    In the following, when needed we will simply refer to 1991 and 2001 data.

  6. 6.

    Here and in what follows, we will refer to ‘foreigner’ as ‘foreign-born’ in the UK and Ireland, and ‘with foreign citizenship’ elsewhere.

  7. 7.

    REGIO also contains data for ‘Compensation of employees’ but scattered and only available at NUTS 2 level.

  8. 8.

    Where data availability makes computation possible, the correlation between restaurant prices and house prices is typically large and positive. For example, in a sample of 12 major Italian cities such correlation was roughly 70 % in 2001.

  9. 9.

    As explained in Sect. 2, population is classified by citizenship in all countries apart from the UK and Ireland for which we use the ‘country of birth’.

  10. 10.

    Local external effects can be positive, due to easier non-market interactions leading to technological externalities (see Ciccone 2002; Ciccone and Hall 1996) or negative, due to higher congestion and consequent waste of resources that make interactions difficult.

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Acknowledgement

We thank Andrea Ichino, Francesco D’Amuri and Giovanni Peri as well as seminar participants at FEEM and the University of Bologna for comments. An early version of the paper was presented at the final ENGIME Conference on ‘Multicultural Cities: Diversity, Growth and Sustainable Development’, Rome, November 2004. We thank all the participants for their comments. We thank the European Commission (“SUS. DIV Network of Excellence, Contract No. CIT3-CT-2005–513438”) and the Volkswagen Foundation for financial support.

Author information

Authors and Affiliations

  1. FEEM, Milano, Italy

    Elena Bellini & Dino Pinelli

  2. London School of Economics and Bocconi University, Milan, Italy

    Gianmarco I. P. Ottaviano

  3. University of Bologna, Bologna, Italy

    Giovanni Prarolo

Authors
  1. Elena Bellini
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  2. Gianmarco I. P. Ottaviano
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  3. Dino Pinelli
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  4. Giovanni Prarolo
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Corresponding author

Correspondence to Giovanni Prarolo .

Editor information

Editors and Affiliations

  1. , Dept. of Geography and Environment, London School of Economics, Houghton Street, London, WC2A 2AE, United Kingdom

    Riccardo Crescenzi

  2. , Institutional Analysis and, Università Bocconi, via Rontgen 1, Milano, 20121, Italy

    Marco Percoco

Annex 1

Annex 1

  Descriptive statistics of the variables used in the regressions
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  Correlation matrix of the variables used in the regressions (2001)
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Bellini, E., Ottaviano, G.I.P., Pinelli, D., Prarolo, G. (2013). Cultural Diversity and Economic Performance: Evidence from European Regions. In: Crescenzi, R., Percoco, M. (eds) Geography, Institutions and Regional Economic Performance. Advances in Spatial Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33395-8_7

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  • DOI: https://doi.org/10.1007/978-3-642-33395-8_7

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