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Valuing Cultural Diversity of Cities

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This paper estimates the impact local cultural diversity has on city wage and rent premiums, and whether diversity is a source of local production and/or consumption of amenities.

Cultural diversity is measured by birthplace, ethnicity, or religion. The researchers find that the presence of people from different cultural backgrounds enhances the profitability of urban firms. In contrast, a city’s population has a weak preference for living near others who are culturally like them. The effects are stronger in larger cities.

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