Unity in Diversity? How Intergroup Contact Can Foster Nation Building⇤ Samuel Bazzi† Arya Gaduh‡ Alexander Rothenberg§ Maisy Wong¶ Boston University University of Arkansas RAND Corporation University of Pennsylvania and CEPR January 2018 Abstract Throughout history, many governments have introduced policies to unite diverse groups through a shared sense of national identity. However, intergroup relationships at the local level are often slow to develop and confounded by spatial sorting and segregation. We shed new light on the long-run process of nation building using one of history’s largest resettlement programs. Between 1979 and 1988, the Transmigration program in Indonesia relocated two million voluntary migrants from the Inner Islands of Java and Bali to the Outer Islands, in an effort to integrate geographically segre- gated ethnic groups. Migrants could not choose their destinations, and the unprecedented scale of the program created hundreds of new communities with varying degrees of diversity. We exploit this policy-induced variation to identify how diversity shapes incentives to integrate more than a decade after resettlement. Using rich data on language use at home, marriage, and identity choices, we find stronger integration in diverse communities. To understand why changes in diversity did not lead to social anomie or conflict, we identify mechanisms that influence intergroup relationships, including residential segregation, cultural distance, and perceived economic and political competition from mi- grants. Overall, our findings contribute lessons for the design of resettlement policies and provide a unique lens into the intergenerational process of integration and nation building. JEL Classifications: D02, D71, J15, O15, R23 Keywords: Diversity, Identity, Language, Cultural Change, Migration, Nation Building ⇤We thank Alberto Alesina, Oriana Bandiera, Toman Barsbai, Giorgio Chiovelli, Raquel Fernandez, Paola Giuliano, Dilip Mookherjee, Nathan Nunn, Daniele Paserman, Ben Olken, Imran Rasul and seminar participants at Boston University, George- town University, Harvard University, the Kiel Institute, McGill University, MIT, Notre Dame, University of Colorado Denver, University of Southern California, University of Toronto, Wellesley College, the Barcelona Graduate School Summer Forum, the 2017 DIAL Development Conference, the 2017 Midwest International Development Conference, the NBER Political Economy meeting, the Ninth International Migration and Development Conference, the 2016 Annual European Conference of ASREC, and the Northeast Universities Development Consortium 2016 Conference for helpful suggestions. Maisy Wong is grateful for financial support from the Research Sponsors Program of the Zell/Lurie Real Estate Center and the Wharton Global Initiatives program. A previous version of this paper circulated under the title “Unity in Diversity? Ethnicity, Migration, and Nation Building in Indonesia.” Jeremy Kirk, Gedeon Lim, JoonYup Park, and Xuequan Peng provided excellent research assistance. All errors remain ours. †Department of Economics. 270 Bay State Rd., Boston, MA 02215. Email: [email protected]. ‡Sam M. Walton College of Business. Department of Economics. Business Building 402, Fayetteville, AR 72701-1201. Email: [email protected]. §1200 South Hayes St., Arlington, VA 22202-5050. Email: [email protected]. ¶Wharton Real Estate. 3620 Locust Walk, 1464 SHDH, Philadelphia, PA 19104-6302. Email: [email protected]. 1 [The] central challenge of modern, diversifying societies is to create a new, broader sense of ‘we’. —Robert Putnam, The 2006 Johan Skytte Prize Lecture 1 Introduction Uniting people from diverse cultures is a founding principle of many nation states.1 Throughout history, leaders have introduced policies to foster a national identity that would sustain an “imagined political community” in which citizens remain connected by shared history and values, despite never meeting one another (Anderson, 1983). However, with rising geographic mobility, there are concerns that grow- ing local diversity may encourage a narrower sense of “we” and undermine this nation-building objec- tive (Putnam, 2007).2 The recent refugee crisis has also stoked debate over how to design resettlement policies to facilitate the integration of diverse groups (Bansak et al., 2018). The key contribution of this paper is to show how local diversity influences integration and con- tributes to an intergenerational process of nation building. Social theorists offer competing views. Some argue that exposure to new cultures provokes backlash and may incite conflict (Blumer, 1958; Hunting- ton, 2004). Others posit that negative sentiments may dissipate as intergroup relationships develop over time with greater contact (Allport, 1954). Alternatively, diversity may engender social anomie or isola- tion, which limits intergroup relationships (Alesina and La Ferrara, 2000; Algan et al., 2016). Empirically, however, it is difficult to identify whether contact strengthens intergroup relationships in the long run because (i) identities and social relationships change slowly and tend to be confounded with time trends, (ii) diverse communities are often unstable due to tipping forces (Schelling, 1971), and (iii) persistent di- versity is often confounded by favorable geography and endogenous sorting (Michalopoulos, 2012). We use a large-scale policy experiment in Indonesia to address these identification challenges. Indonesia’s Transmigration program, one of the largest resettlement efforts in history, provides an ideal setting to understand how intergroup contact can foster nation building. After independence, the government faced urgent pressures to forge an Indonesian identity that would unite diverse groups across the archipelago and overcome secessionist tendencies. The government viewed resettlement as part of a broader effort to integrate more than 700 ethnolinguistic groups that lived historically in seg- regated communities. Between 1979 and 1988, the Transmigration program assigned two million volun- tary migrants (hereafter, transmigrants) from the Inner Islands of Java and Bali to new settlements across the Outer Islands. Each settlement was endowed with the same public institutions and included a mix of Inner and Outer Islanders with the goal of bridging one of the country’s most salient divisions. We exploit the haphazard assignment of transmigrants across settlements to isolate plausibly ex- ogenous, long-run variation in local diversity. Institutional and capacity constraints limited planners’ abilities to systematically assign transmigrants. Moreover, a lottery was used to distribute farm plots and assign housing to newly-arriving migrants. Imperfect land markets tied migrants to these initial 1For example, “United in Diversity” is the motto for the European Union, E pluribus unum (out of many, one) for the United States, and “Unity in Diversity” for South Africa and Indonesia. There are numerous historical examples of efforts “to form French citizens” (Weber, 1976), “to make Italians” (Duggan, 2007), and to create “one kind of man, Indonesian” (Hoey, 2003). 2Alesina et al. (2017) and Miller (2012) discuss challenges of forging a shared identity within the European Union. More generally, migration pressures are growing among minorities within rich countries (see Frey, 2014, on the United States) and in newer migration corridors from poor to rich countries (Hanson and McIntosh, 2016). The U.S. is projected to become a majority minority nation by 2044 (Colby and Ortman, 2014) and the United Kingdom by 2066 (Coleman, 2010). 1 farm plots, limiting ex-post sorting. Ultimately, the large scale of the program created nearly 900 com- munities along a continuum of policy-induced diversity. Using the 2000 Population Census, we show that even after two decades, these communities exhibit significantly greater ethnic diversity—driven largely by the Inner–Outer divide—and less within-village ethnic segregation than other villages in the Outer Islands.3 The persistence of this local diversity suggests limited sorting or tipping that would have otherwise neutralized the initial policy assignment. To address the concern that some of today’s ethnic diversity is explained by sorting, we develop an instrumental variables strategy that leverages this initial assignment. In particular, we instrument for the Inner-Island ethnic share in a village in 2000 using the initial stock of transmigrants assigned in the 1980s. Planners determined potential population sizes in settlements by assessing the carrying capacity of available land using soil attributes and topography. Conditional on these predetermined natural advantages (and hence, on potential population), the larger the initial transmigrant stock, the greater the Inner-Island ethnic share today. We show that this strategy helps rule out endogenous ex- ante assignment and ex-post sorting of migrants to places with tolerant natives. Our key measure of integration is the choice of language used at home, as reported in a 2006 house- hold survey. Language is broadly seen across the globe as the most critical component of national iden- tity (Pew Research Center, 2017). Indeed, policymakers view the national language, Bahasa Indonesia or Indonesian, as synonymous with Indonesian identity, widely promoting its use across economic and social domains.4 Indonesian is rooted in the language of an ethnic minority (Malay), with as few as 5 percent speaking Malay when it was chosen as the national language