The Effect of Diversity on Wellbeing -- Work in Progress -- Simonetta Longhi Institute for Social and Economic Research University of Essex Part of the project Migrant Diversity and Regional Disparity in Europe. Financial support from NORFACE research programme on Migration in Europe - Social, Economic, Cultural and Policy Dynamics is acknowledged

Most governments nowadays recognise the importance of subjective measures of wellbeing for policy Important to be able to identify whether the characteristics of the area where the person lives (e.g. cultural diversity) have an impact on wellbeing This paper brings together two strands of literature: subjective wellbeing and impact of diversity Motivation

Subjective wellbeing is often measured by answers to questions on individual life satisfaction Literature on satisfaction has mostly focused on the role of individual characteristics (gender, age, employment status) and individual life event (divorce, unemployment) More recent studies analyse the impact of the quality of the local area (neighbourhood deprivation) Contribution: is there an impact of cultural diversity on satisfaction? Subjective Wellbeing

Culturally diverse people may have different problem- solving abilities, which may increase productivity and lead to higher wages A diverse local community may enjoy a larger variety of services such as (ethnic) shops and restaurants Cultural differences or a poor understanding of the common language may create misunderstandings, conflicts and uncooperative behaviour Competition for scarce resources among culturally diverse groups may result in racism and social conflicts Contribution: is there an impact of diversity on life satisfaction? Diversity

A diverse population is a population with groups with different: Ethnicity, country of birth, religion But also different: Education/qualifications Occupation, Industries … What is Diversity?

Theoretical Background U it = f(IC it, NC it ) Utility of person i at time t Individual characteristics (age, education, household and employment situation, … personality) Characteristics of the area where the person lives Measured by questions on life satisfaction Focus of this paper: do people have a taste for diversity?

Individual-level longitudinal: panel of UK households, each adult member of the household is interviewed annually Data available: 1991(1996)-2008 Questions on demographics, work, life satisfaction, and more Focus on white British respondents aged 25 or older British Household Panel Survey

How dissatisfied or satisfied are you with your life overall? Answers on a 7-point scale: 1. not satisfied at all not satisfied nor dissatisfied completely satisfied Acceptable measure of utility Measuring Utility

UK Quarterly Labour Force Survey (LFS) Individual-level dataset focusing on employment and labour market activities of respondents; covers the whole UK Large sample size; population representative weights Used to compute aggregate measures More information than census; higher frequency Two versions: ordinary and special licence Aggregate Data

Used to compute area aggregates at the county level (87 in England): unemployment rate median wages proportion population with a degree measures of diversity Covers the whole of the UK, but need to focus on the largest counties (only 29 have always more than 1,000 observations; all are in England) Data available: Special License LFS

Used to compute area aggregates at the regional (only 19 regions in Great Britain): unemployment rate median wages proportion population with a degree measures of diversity Can analyse all UK Data available: Ordinary LFS

Index of fractionalisation (0-1) Higher fractionalisation More diversity Group = size of (ethnic, religious, …) subgroup Population = total population (sum of all subgroups) Measures of diversity: ethnicity, country of birth, religion, education, occupation, industry Measures of Diversity

Impact of area characteristics on individual wellbeing: Satisfaction = f(individual characteristics) Satisfaction = f(individual characteristics + area characteristics) For simplicity assume cardinality (OLS) with FEs (to account for omitted variable bias) Modelling Strategy

Ethnic Diversity GeographyYearNMinMedianMax Counties Counties Regions Regions

Diversity by Country of Birth GeographyYearNMinMedianMax Counties Counties Regions Regions

Religious Diversity GeographyYearNMinMedianMax Counties Counties Regions Regions

Diversity in Education GeographyYearNMinMedianMax Counties Counties Regions Regions No variation across areas or over time

Occupational Diversity GeographyYearNMinMedianMax Counties Counties Regions Regions No variation across areas or over time

Industrial Diversity GeographyYearNMinMedianMax Counties Counties Regions Regions No variation across areas or over time

CountiesRegions Age Age square ** Married0.293**0.284** Children * Annual income (1,000) Employed0.119**0.172** Self-employed0.125*0.168** Unemployed-0.148**-0.116** Retired (ref: other inactive)0.187**0.230** Intercept5.496**5.160** Observations20,491133,849 Period Individual Characteristics Only * Significant at 5%, ** Significant at 1%

CountiesRegions Age Age square ** Married0.293**0.284** Children * Annual income (1,000) Employed0.119**0.172** Self-employed0.125*0.168** Unemployed-0.148**-0.116** Retired (ref: other inactive)0.187**0.230** Intercept5.496**5.160** Observations20,491133,849 Period Individual Characteristics Only The coefficients do not change when we include (aggregate) measures of the characteristics of the area * Significant at 5%, ** Significant at 1%

CountiesRegions Ethnic diversity Div. birth * Religious div *-0.547* Div. education Occupational div Industrial div ** Unemploy. rate * Median wages-0.103**-0.107** * % with degree0.023**0.021** Intercept ** **4.972** Observations20, ,849 70,367 Period Characteristics of the Area Also includes individual characteristics * Significant at 5%, ** Significant at 1%

CountiesRegions Ethnic diversity Div. birth * Religious div *-0.547* Div. education Occupational div Industrial div ** Unemploy. rate * Median wages-0.103**-0.107** * % with degree0.023**0.021** Intercept ** **4.972** Observations20, ,849 70,367 Period Characteristics of the Area Also includes individual characteristics * Significant at 5%, ** Significant at 1%

CountiesRegions Ethnic diversity Div. birth * Religious div *-0.547* Div. education Occupational div Industrial div ** Unemploy. rate * Median wages-0.103**-0.107** * % with degree0.023**0.021** Intercept ** **4.972** Observations20, ,849 70,367 Period Characteristics of the Area Also includes individual characteristics * Significant at 5%, ** Significant at 1%

Preliminary Conclusions Diversity does not seem to have a relevant impact on wellbeing, with the exception of religious diversity Higher religious diversity may lead to lower levels of wellbeing in the population Other area characteristics do have an impact Next Steps Endogeneity maybe not a problem here? Add further aggregate measures? (crime, air quality… if available) Exclude those who move across areas