Ethnic Diversity and Attitudes Towards Redistribution: A Review of the Literature

There is a large literature on the costs and benefits of immigration within a given system of social security. More recently, economists have begun to address a related question: does immigration and, more generally, ethnic diversity change this system of social security in turn? A number of empirical studies suggest that ethnic diversity does indeed matter for the extent of redistribution. First, there is evidence that actual public spending is associated with the degree of ethnic diversity. Second, studies that attempt to explore the mechanisms behind this aggregate relationship have found that individual attitudes and behaviour are affected by ethnic diversity. The purpose of this paper is to survey this empirical literature. We cover the studies that have appeared since the survey by Alesina and La Ferrara (2005) in the Journal of Economic Literature. In particular, we review the fast-growing literature that uses controlled experiments to study the effects of ethnic diversity on redistribution. Our main conclusion from this survey is that although numerous studies document a negative and statistically significant relationship, most of these studies do not point to a quantitatively important role for ethnic diversity in shaping natives' preferences for redistribution. In most studies, the association is much weaker than for other factors such as own income (current or expected) or beliefs about the role of effort versus luck in determining this income. Moreover, it seems that the sizeable negative association between ethnic diversity and support for redistribution that is sometimes found in U.S. studies does not generalize to Canada or Europe. However, the evidence for countries other than the U.S. is scarce so far, and there is certainly need for further research.

Stichnoth, Holger and Karine Van der Straeten (2009), Ethnic Diversity and Attitudes Towards Redistribution: A Review of the Literature, ZEW Discussion Paper No. 09-036, Mannheim.