THE BENEFITS OF MIGRATION Cultural diversity and labour market success

Assuming that migration and integration have lasting effects on economic and social processes, this paper analyses if a diverse cultural environment has a positive impact on labour market success. We expect that culturally diverse labour markets provide new opportunities through an open and tolerant climate, thus contributing to overall economic growth. We test this assumption by analysing the successful transition from education to work depending on the regional distribution and ethnic mix of the foreign population in Germany (cultural diversity). To account for variation within Germany, cultural diversity is observed at small administrative units. We analyse a cohort of young adults at the time of the successful completion of their apprenticeship in Germany and follow them through the beginning of their career. The concentration on a homogenous group regarding occupational certificates enables us to focus on the effects of the local and social environment as well as individual characteristics such as their national background on finding a job (or not). We apply an instrumental variable design to disentangle the effects of cultural diversity and share of foreigners. The results show that both young foreigners and Germans face significantly lower barriers for employment entry in culturally more diverse German regions.