Diversity and local public goods: a natural experiment with exogenous residential allocation

Abstract

This paper demonstrates the effects of ethnic diversity on social relationships and the quality of public spaces at a very finite neighborhood level. We use detailed block level data on diversity and housing quality from a representative survey on housing in France. We show how and to what extent diversity among adjacent neighborhoods can affect household well-being and the quality of local public goods, whereas the previous literatura looks at aggregate indicators and outcomes. Our identification strategy relies on the exogeneity of public housing allocations with respect to ethnic characteristics in France, and thereby eliminates bias due to endogenous residential sorting. Diversity is shown to have a negative effect on local public goods, either due to vandalism and to the lack of social policing, or due to collective action failure for maintenance. However, we find that diversity has no robust effect on civil conflict at a local level and, if anything, is more related to social anomie. We test the exogeneity of residential allocation across public housing blocks with respect to ethnic characteristics. We also show that our results are not driven by potential biases from self-reported well-being and that they hold even with objective measures of housing quality.