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
Motivation



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
Subjective Wellbeing



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?
Diversity




Culturally diverse people may have different problemsolving 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?
What is Diversity?
A diverse population is a population with
groups with different:
 Ethnicity, country of birth, religion
But also different:
 Education/qualifications
 Occupation, Industries
 …
Theoretical Background
Uit = f(ICit, NCit)
Utility of person i at time t
Measured by questions
on life satisfaction
Characteristics of
the area where the
person lives
Focus of this paper:
do people have a taste
for diversity?
Individual characteristics (age, education, household
and employment situation, … personality)
British Household Panel Survey
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

Measuring Utility


“How dissatisfied or satisfied are you with your life
overall?”
Answers on a 7-point scale:
1.
2.
not satisfied at all
3.

4.
5.
6.
not satisfied nor dissatisfied
7.
completely satisfied
Acceptable measure of utility
Aggregate Data

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



Special License LFS

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: 2003-2007
“Ordinary” 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: 1992-2011
Measures of Diversity
 Groupkrt 

Frt  1   
k 1  Populationrt 
K
2
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

Modelling Strategy

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)
Ethnic Diversity
Ethnic Diversity - Regions
0
0
2
2
Density
Density
4
4
6
6
Ethnic Diversity - Counties
0
.2
.4
.6
.8
0
.2
.4
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.6
.8
Fractionalisation
2005
Year
2003
2007
1996
2008
1996
2005
N
29
29
17
18
Min
0.035
0.060
0.041
0.079
Median
0.095
0.184
0.099
0.196
1999
2008
Max
0.618
0.673
0.525
0.687
2002
Diversity by Country of Birth - Regions
10
0
5
5
10
Density
15
15
20
20
Diversity by Country of Birth - Counties
0
Density
Diversity by Country of Birth
0
.1
.2
.3
.4
0
.1
.2
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.3
.4
Fractionalisation
2005
Year
2003
2007
1996
2008
1996
2005
N
29
29
18
18
Min
0.020
0.027
0.015
0.046
Median
0.049
0.073
0.030
0.084
1999
2008
Max
0.291
0.337
0.222
0.354
2002
0
2
2
4
Density
4
6
6
Religious Diversity - Regions
8
Religious Diversity - Counties
0
Density
Religious Diversity
.2
.3
.4
.5
.6
.2
.3
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.4
.5
Fractionalisation
2005
Year
2003
2007
2002
2008
2002
2008
N
29
29
17
17
Min
0.188
0.253
0.182
0.243
Median
0.266
0.341
0.269
0.380
Max
0.512
0.582
0.492
0.586
2005
.6
Diversity by Education - Regions
0
20
50
40
Density
60
100
80
100
150
Diversity in Education - Counties
0
Density
Diversity in Education
.8
.805
.81
.815
.82
.79
.8
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.81
.82
Fractionalisation
2005
Year
2003
2007
1996
2008
1996
2005
N
29
29
18
18
Min
0.806
0.798
0.789
0.803
Median
0.813
0.812
0.808
0.817
1999
2008
Max
0.820
0.820
0.821
0.820
2002
Occupational Diversity - Regions
150
100
0
50
20
40
Density
60
200
80
250
100
Occupational Diversity - Counties
0
Density
Occupational Diversity
.85
.86
.87
.88
.89
.865
.87
.875
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.88
.885
Fractionalisation
2005
Year
2003
2007
1996
2008
1996
2005
N
29
29
18
18
Min
0.866
0.854
0.871
0.865
Median
0.882
0.880
0.882
0.883
1999
2008
Max
0.886
0.887
0.885
0.886
2002
5000
Industrial Diversity - Regions
3000
0
0
1000
2000
2000
Density
3000
4000
4000
Industrial Diversity - Counties
1000
Density
Industrial Diversity
.0038
.004
.0042
.0044
.0038
.0039
Fractionalisation
2003
2006
Geography
Counties
Counties
Regions
Regions
2004
2007
.004
.0041
.0042
Fractionalisation
2005
Year
2003
2007
1996
2008
1996
2005
N
29
29
18
18
Min
0.004
0.004
0.004
0.004
Median
0.004
0.004
0.004
0.004
1999
2008
Max
0.004
0.004
0.004
0.004
2002
.0043
Individual Characteristics Only
Age
Age square
Married
Children
Annual income (1,000)
Employed
Self-employed
Unemployed
Retired (ref: other inactive)
Intercept
Counties
-0.002
-0.000
0.293**
0.065
0.000
0.119**
0.125*
-0.148**
0.187**
5.496**
Regions
0.003
-0.000**
0.284**
-0.028*
-0.000
0.172**
0.168**
-0.116**
0.230**
5.160**
Observations
Period
20,491
2003-2007
133,849
1996-2008
* Significant at 5%, ** Significant at 1%
Individual Characteristics Only
Counties
Age
The coefficients do not -0.002
Age square
-0.000
change when we
Married
0.293**
include (aggregate)
Children
0.065
measures of the
characteristics of the
Annual income (1,000)
0.000
area
Employed
0.119**
Self-employed
0.125*
Unemployed
-0.148**
Retired (ref: other inactive)
0.187**
Intercept
5.496**
Regions
0.003
-0.000**
0.284**
-0.028*
-0.000
0.172**
0.168**
-0.116**
0.230**
5.160**
Observations
Period
133,849
1996-2008
* Significant at 5%, ** Significant at 1%
20,491
2003-2007
Characteristics of the Area
Ethnic diversity
Div. birth
Religious div.
Div. education
Occupational div.
Industrial div.
Unemploy. rate
Median wages
% with degree
Intercept
Counties
0.141
0.058
-0.258
-0.093
-0.560*
-0.547*
0.107
2.983
170.758
0.023
0.027*
-0.103** -0.107**
0.023**
0.021**
1.398
4.834**
1.863
4.775
205.872**
0.005
-0.000
0.005
-1.684
Observations
Period
20,491
2003-2007
133,849
1996-2008
20,491
2003-2007
Also includes individual characteristics
* Significant at 5%, ** Significant at 1%
0.096
0.005
Regions
0.116
0.093
0.002
-0.001*
0.004
4.931**
-0.287
1.069*
-0.191
0.000
-0.001
0.000
4.972**
133,849
70,367
1996-2008 2002-2008
Characteristics of the Area
Ethnic diversity
Div. birth
Religious div.
Div. education
Occupational div.
Industrial div.
Unemploy. rate
Median wages
% with degree
Intercept
Counties
0.141
0.058
-0.258
-0.093
-0.560*
-0.547*
0.107
2.983
170.758
0.023
0.027*
-0.103** -0.107**
0.023**
0.021**
1.398
4.834**
1.863
4.775
205.872**
0.005
-0.000
0.005
-1.684
Observations
Period
20,491
2003-2007
133,849
1996-2008
20,491
2003-2007
Also includes individual characteristics
* Significant at 5%, ** Significant at 1%
0.096
0.005
Regions
0.116
0.093
0.002
-0.001*
0.004
4.931**
-0.287
1.069*
-0.191
0.000
-0.001
0.000
4.972**
133,849
70,367
1996-2008 2002-2008
Characteristics of the Area
Ethnic diversity
Div. birth
Religious div.
Div. education
Occupational div.
Industrial div.
Unemploy. rate
Median wages
% with degree
Intercept
Counties
0.141
0.058
-0.258
-0.093
-0.560*
-0.547*
0.107
2.983
170.758
0.023
0.027*
-0.103** -0.107**
0.023**
0.021**
1.398
4.834**
1.863
4.775
205.872**
0.005
-0.000
0.005
-1.684
Observations
Period
20,491
2003-2007
133,849
1996-2008
20,491
2003-2007
Also includes individual characteristics
* Significant at 5%, ** Significant at 1%
0.096
0.005
Regions
0.116
0.093
0.002
-0.001*
0.004
4.931**
-0.287
1.069*
-0.191
0.000
-0.001
0.000
4.972**
133,849
70,367
1996-2008 2002-2008
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