Diasporas, diversity, and economic activity: Evidence from 18th-century Berlin

Abstract

Diversity may either increase economic activity by utilizing complementarities in production or lead to costly conflict over resources. Using city-district panel data from 18th-century Berlin, a major center of refuge for persecuted minorities in early modern Europe, we analyze the relationship between changes in diversity and economic activity. Prussian rulers specifically invited groups of skilled immigrants, such as Jews, Huguenots, and Bohemians, to settle in Berlin’s newly-developed city quarters. We find that the resulting ethnic diversity fosters textile production in a much broader range of products than individual ethnicities, arguably reflecting complementarities between groups.