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Table 5 Instrumental variable estimation showing the impact of diversity on wages. Dependent variable: log of weekly wages

From: The regional impact of cultural diversity on wages: evidence from Australia

Explanatory variables Whole sample
IV-OLS IV-fixed effects
(1) (2) (3) (4)
Diversity index 0.625***   0.203  
  (0.074)   (0.168)  
Share of foreigners   0.693***   0.159
   (0.084)   (0.123)
Demographic controls Yes Yes Yes Yes
Human capital controls Yes Yes Yes Yes
Time dummiesa Yes Yes Yes Yes
Individual effects No No Yes Yes
Observations 20,156 19,795 19,706 19,335
R-squared 0.565 0.581 0.347 0.359
First stage for diversity index     
Predicted diversity index 0.614***   0.245***  
  (0.016)   (0.030)  
First stage for share of foreigners     
Predicted share of foreigners   0.835***   0.594***
   (0.021)   (0.039)
Instrument tests     
Underidentification testb 622.98 626.47 52.32 140.65
p value 0.000 0.000 0.000 0.000
Weak identification testc 1454.11 1637.39 66.10 229.06
  1. Values are estimated for the HILDA wave 4–11 respondents aged 16–45 years. Robust standard errors are in parentheses and are adjusted for clusters by individuals. The reported sample sizes differ from the original (n = 44,634) due to sample weighting and lagging. Demographic controls include age and age-squared in all models, plus gender and marital status in the OLS models. Human capital controls include education, weekly hours worked, and job tenure, in all models, plus English language skill in OLS
  2. Significance values indicate *p < 0.1; **p < 0.05; ***p < 0.01
  3. aTime dummies are partialled out in the FE models
  4. bBased on the Kleibergen-Paap rk LM statistic
  5. cBased on the Kleibergen-Paap rk Wald F statistic: Stock-Yogo weak ID test critical value maximal IV sizes range as follows: 16.38 (10 %), 8.96 (15 %), 6.66 (20 %), and 5.53 (25 %)