Immigrant Diversity and Long-Run Development: Evidence from the Age of Mass Migration in Brazil

Abstract

The article investigates the long-term economic effects immigrant population’s composition. Focusing on the large immigration wave experienced by Brazil at the turn of the twentieth century, we ask whether municipalities that received a population of immigrants characterized by a more diverse mix of origin countries ended up having better long-term economic outcomes. To identify causal effects, we use unique historical individual data about immigrants arriving in São Paulo between 1880 and 1920 and develop an instrumental variable strategy that combines over-time variation in the composition of immigrants arriving from overseas with the timing of the railway network expansion in the state. We find that a one standard deviation increase in accumulated immigrant diversity in 1920 is associated with a 7-8% higher income per capita in 2000. This effect is economically relevant and robust to various identification tests. Furthermore, when exploring the mechanisms through which immigrant diversity affected long-term development, we document that municipalities with a more diverse stock of migrants also had (i) a larger proportion of employment in industry and services in 1920, 1940 and 2000; (ii) greater occupational diversity in 1920 and 2000; (iii) higher municipal spending on education, as early as the 1920s, and higher education outputs in the long-run.