Immigration, Ethnic Diversity, and Political Outcomes: Evidence from Denmark

AuthorNikolaj A. Harmon
DOIhttp://doi.org/10.1111/sjoe.12239
Date01 October 2018
Published date01 October 2018
Scand. J. of Economics 120(4), 1043–1074, 2018
DOI: 10.1111/sjoe.12239
Immigration, Ethnic Diversity, and Political
Outcomes: Evidence from Denmark*
Nikolaj A. Harmon
University of Copenhagen, DK-1353 Copenhagen K, Denmark
nikolaj.harmon@econ.ku.dk
Abstract
I study the impact of immigration and increasing ethnic diversity on political outcomes in
immigrant-receiving countries, focusing on immigration and election outcomes in Danish
municipalities between 1981 and 2001.A novel instrumental variable strategy based on historical
housing stock data addresses issues of endogenous location choices of immigrants and a rich set
of control variables is employedto isolate ethnic diversity effects from those of other immigrant
characteristics. Increases in local ethnic diversity lead to rightwardshifts in election outcomes by
shifting electoral support away from traditional “big government”left-wing par ties and towards
anti-immigrant nationalist parties. This holds for both local and national elections.
Keywords: Elections; nationalism; refugees; size of the public sector; voting
JEL classification:D64; H11; H23; J11; Z13
I. Introduction
In this paper, I study the impact of immigration and ethnic diversity on
political outcomes. Both anecdotal evidence and existing work on ethnic
diversity offer good reasons to expect that the arrival of immigrants and
the associated increases in ethnic diversity might have a causal effect on
politics. Perhaps the most striking piece of anecdotal evidence comes from
recent European history: while immigration flows into Europe have risen
dramatically over the last 35 years, leading to large increases in ethnic
diversity, European politics is viewed by many to have taken a systematic
rightward turn, fueled in large part by increased success of many anti-
immigrant nationalist parties.1Beyond anecdote, many existing studies in
*This paper was previouslycirculated under the title “The End of the European Welfare States?
Migration, Ethnic Diversity,and Public Goods”. I am particularly indebted to Raymond Fisman,
David S. Lee, Shanker Satyanath, and David D.Lassen for their help and detailed comments. I
would also like to thank Arindrajit Dube,Taryn Dinkelman, Rasmus Landersø, Anna F.Larsen,
and the late Lena Nekby,as well as participants at the Princeton Labor Lunch. Any errors are my
own.
1See, for example, “Continent Of Fear:The Rise Of Europe’sRight-Wing Populists”, Der Spiegel,
September 28, 2010 (http://www.spiegel.de/international/europe/continent-of-fear-the-rise- of-
europe-s-right- wing-populists-a- 719842.html).
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1044 Immigration, ethnic diversity, and political outcomes
economics have already documented a cross-sectional relationship between
ethnic diversity and political preferences as well as political outcomes.
In this paper, I ask whether there are causal underpinnings to the
European phenomenon described above, that is, whether the mere presence
of immigrants has a causal effect on election outcomes in immigrant-
receiving countries. In particular, I examine whether immigration-driven
increases in ethnic diversity have systematic effects on overall left–right
politics and whether they lead to increased success for anti-immigrant
nationalist parties. If increasing ethnic diversity alters the political balance
between the “big government” left wing and “small government” right wing,
immigration might have important, indirect public finance implications by
systematically affecting the level of redistribution or public spending. If
immigration by itself also causes a surge in nationalism, this might put
an upper bound on the amount of immigration that is feasible before anti-
immigration sentiments begin to dominate politically.
I examine the specific case of election outcomes and immigration in
Danish municipalities between 1981 and 2001. The Danish immigration
experience over the last 35 years is very similar to that of the rest
of Europe. In 1981, the yearly net migration to Denmark from non-
Western countries was just over 1,000 per year. Twenty years later, in
2001, this number had increased more than tenfold to 11,000, resulting in a
corresponding increase in the stock of non-Western immigrants in Denmark
from 55,000 to 269,000, which is almost a fivefold increase in just 20
years. However, the increased immigration flows were not distributed evenly,
resulting in very significant variation in the growth of ethnic diversity.
While some municipalities experienced increases in the share of immigrants
in the population of well over 10 percentage points, others experienced
essentially no change at all. Combined with the high level of political
autonomy of Danish municipalities, this makes the Danish setting well
suited for examining the ethnic diversity effects of immigration on political
outcomes.
I present results from regressions of changes in election outcomes on
changes in the non-Western immigrant share in the municipality and focus
on changes in the success of the traditional “big government” left-wing
parties as well as the particular success of right-wing, anti-immigrant
nationalists. In addition to controlling for time-invariant municipality
attributes through first-differencing, I employ a rich set of controls to
isolate the effects of ethnic diversity. In particular, a set of socioeconomic
controls is used to examine the possibility that immigration affects political
preferences simply because immigrants and refugees are poorer or because
they adversely affect local labor-market conditions.
Empirical studies of immigration have obvious endogeneity concerns,
given that immigrants themselves choose where to live. To address this, I
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N. A. Ha rmon 1045
develop a novel instrumental variable (IV) strategy based on the following
two features of the Danish context.
1. Because of a law that constrains the ability of foreigners to purchase
real estate, the availability of rental housing is a particularly strong
predictor of where immigrants choose to locate in Denmark.
2. Detailed data on the composition of the housing stock are available
at the municipal level.
As high-rises are much more likely to serve as rental housing and because
the composition of the housing stock is very persistent over time, I
therefore use the share of the 1970 housing stock comprised by high-rises
as an instrument for later immigration flows. The underlying identifying
assumption is that the characteristics of the 1970 housing stock have no
direct effect on changes in election outcomes between 1981 and 2001,
conditional on appropriate controls.
The main IV results confirm that immigration-driven increases in ethnic
diversity have a causal impact on political outcomes. In particular, higher
ethnic diversity decreases political support for traditional left-wing parties in
municipal elections and increases support for nationalist parties: an increase
of 1 percentage point in the share of non-Western immigrants is estimated
to decrease the percentage of left-wing seats on the municipal board by
between 2.1 and 5.4 percentage points and to increase the percentage of
nationalist seats by between 1.2 and 2.3 percentage points, depending on
the specification. Thus, increases in ethnic diversity shift overall political
power towards the right-wing block and towards anti-immigrant parties in
particular. The same pattern of effects appears for national elections. Given
the very different political issues decided at the two levels of government,
this similarity could suggest that the effects of ethnic diversity are related
to an overall shift in preferences or “ideology” and are not driven by
particular political issues. The magnitude of the estimated effects also
suggests that changes in ethnic diversity have important implications for
aggregate elections outcomes; a simple calculation suggests that changes
in ethnic diversity were a significant contributor to the electoral defeat of
the left-wing coalition in the 2001 national elections in Denmark. Finally, a
comparison of IV and ordinary least-squares (OLS) estimates suggests that
endogenous location choice of immigrants causes an overall pro-left bias
in OLS estimates. This is consistent with existing evidence on immigrant
location choice in Denmark.
Two existing bodies of literature motivate the present paper. The first
is a series of papers that establish a negative relationship between
ethnic diversity and left-wing political attitudes (Luttmer,2001;
Senik et al.,2009), as well as the level of public spending or public
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The editors of The Scandinavian Journal of Economics 2017.

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