Document Type

Working Paper

Publication Date

Fall 11-2007

JEL Codes

O40, J24, O51

Working Paper Number



This paper employs industry-level U.S. Census data from 1980-2000 to assess the aggregate effects of racial diversity. While most international accounts find that diversity reduces productivity, I argue that the U.S. experience is more nuanced. Unqualified statements about the costs and merits of diversity are unwarranted, as racial heterogeneity increases productivity within many, but not all, industries. Sectors employing a large number of workers responsible for creative decision-making and customer service experience gains from diversity, while industries characterized by high levels of group effort suffer losses. The results thus reconcile two competing literatures by suggesting that diversity improves decision-making and problem solving, but also encumbers common action and public goods provision.


I would like to acknowledge the guidance and advice from the faculty and graduate students of the University of California, Davis. I especially thank Giovanni Peri, HilaryW. Hoynes, Alan M. Taylor, Florence Bouvet, and Ahmed S. Rahman. Three anonymous referees, Rukmani Gounder, Margriet Caswell, and the attendees of the Western Economics Association International Conference in San Francisco provided helpful comments and suggestions, as did Takao Kato, RobertWTurner, and faculty members of Colgate University and San Diego State University. A fellowship from the University of California Office of the President provided support for this research.

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