Cultural and economic integration of immigrant minorities: Analytical framework and policy implications

• Published date: 01 December 2023
• Author: Mark Gradstein,Moshe Justman
• Date: 01 December 2023
• DOI: http://doi.org/10.1111/jpet.12662

Received: 31 December 2022

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Accepted: 11 August 2023

DOI: 10.1111/jpet.12662

ORIGINAL ARTICLE

Cultural and economic integration of

immigrant minorities: Analytical framework

and policy implications

Mark Gradstein

1

|Moshe Justman

2

1

Department of Economics, CEPR,

CESifo, IZA, Ben Gurion University,

Beer‐Sheva, Israel

2

Department of Economics, Ben Gurion

University, Beer‐Sheva, Israel

Correspondence

Mark Gradstein, Department of

Economics, CEPR, CESifo, IZA, Ben

Gurion University, Beer‐Sheva, Israel.

Email: grade@bgu.ac.il

Abstract

The cultural diversity that new immigrants bring to the

host economy is potentially beneficial for the produc-

tivity of both immigrants and natives, but immigrants

must assimilate to some extent for these benefits to be

realized. In general, immigrants assimilate more slowly

than natives would like, as they ignore the external

material benefits of assimilation for natives and their

resistance to foreign cultural influences. We develop a

formal framework that highlights the complementarity

between immigrants' cultural assimilation, economic

integration, and investment in human capital, indicat-

ing the scope for mutually beneficial policies, offering

immigrants material incentives to assimilate more

rapidly.

KEYWORDS

cultural diversity, economic growth, immigration, social

integration

We have benefited from helpful suggestions by several colleagues and, especially, from the

insightful comments of the editor and referees of this Journal.

…immigration is always, at the most personal level, a cultural encounter. It's a person with

one language and set of values interacting with a person with another language and set of

values. David Brooks, New York Times, November 7, 2019

J Public Econ Theory. 2023;25:1337–1360. wileyonlinelibrary.com/journal/jpet

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This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2023 The Authors. Journal of Public Economic Theory published by Wiley Periodicals LLC.

1|INTRODUCTION

Waves of international migration fueled by technological change and globalization, and by wars

and revolutions, are throwing together large cultural collectives with different racial and ethnic

backgrounds, with different languages and faiths and social norms, to live and work together in

a shared political, economic, and cultural space. In the late 19th century through to the early

20th century, these large waves of migration moved from densely populated, land‐scarce

European countries to sparsely populated areas in the Americas and the antipodes rich in land

and other natural resources; this was the Age of Mass Migration. More recent decades have

seen large migration flows from less developed to more developed nations—from Latin

America to the United States, from Africa and the Middle East to Western Europe.

1

These

waves of immigration, though offering the prospect of large economic gains for immigrants and

host countries alike, often create cultural tensions which threaten the realization of these gains.

The economic success of these large movements depends on the effective social integration

of the new migrants. Some countries have met this challenge well, creating conditions that

dispose migrant and native populations to bridge their differences and interact productively,

while others are plagued by religious and ethnic strife between migrant groups asserting their

separate cultural identity and natives who see them as a threat to their social harmony. Such

cultural tensions may lead to segregation of the immigrant population in ethnic enclaves,

physical or virtual, which may serve the immediate cultural preferences of both groups but

inhibit current and future economic growth (Chiswick & Miller, 2002; Cutler & Glaeser, 1997;

Lazear, 1999).

In this paper, we develop a model that embeds the productive and cultural interaction

between migrants and the host population in a macroeconomic framework that incorporates a

reciprocal effect between cultural distance and economic productivity, allowing us to identify

and assess different policy approaches. It rests on the assumption that the cultural diversity that

new immigrants bring to the host economy is potentially beneficial for the productivity of both

immigrants and natives, but the initial cultural distance between immigrants and natives is

excessive and impedes cooperation, and immigrants must assimilate to some extent for these

benefits to be realized. The need for policy intervention arises because immigrants generally

assimilate more slowly than natives would like, as they ignore the external material benefits of

assimilation for natives, and attach intrinsic value to their cultural traditions, which natives

view in a negative light, as socially disruptive. Moreover, we assume that immigrants' initial

cultural assimilation and their investment in human capital complement each other in

production so that the economic benefit of reducing the cultural distance between immigrants

and natives increases directly with their capacity to invest in human capital.

2

There is broad empirical support for these assumptions. The assumption that some cultural

diversity is beneficial for productivity finds support in a growing body of historical evidence on

its general productive advantages and in more recent evidence of its particular advantage for

innovative activity. Historical studies by Ager and Brückner (2013), Burchardi et al. (2020),

Campo et al. (2020), Sequeira et al. (2020), and Tabellini (2020) highlight the local benefits of

1

Many industrialized countries now have over 10% foreign‐born residents. Ethnic and racial minorities accounted for

all of the US population growth in the last decade, https://www.census.gov/data/tables/time-series/demo/popest/

2010s-national-detail.html.

2

We allow differences in skill levels between immigrants and natives but abstract from differences in skill types. This is

consistent with the convergence of the educational composition of immigrants to that of natives in the United States.

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GRADSTEIN and JUSTMAN