Life satisfaction, ethnicity and neighbourhoods: Is there an effect of neighbourhood ethnic composition on life satisfaction?

•UK ethnic minorities have lower life satisfaction than the majority across generations.•Neighbourhood type and deprivation play only a small role in satisfaction gaps.•But ethnic groups, particularly when UK-born tend to be happier living among co-ethnics.

Immigrants and ethnic minorities tend to have lower life satisfaction than majority populations. However, current understanding of the drivers of these gaps is limited. Using a rich, nationally representative data set with a large sample of ethnic minorities and matched neighbourhood characteristics, we test whether first and second generation minorities experience lower life satisfaction once accounting for compositional differences and whether, specifically, neighbourhood deprivation impacts their wellbeing. We further investigate whether a larger proportion of own ethnic group in the neighbourhood improves satisfaction. We find life satisfaction is lower among ethnic minorities, and especially for the second generation, even controlling for individual and area characteristics. Neighbourhood concentration of own ethnic group is, however, associated with higher life satisfaction for Black Africans and UK born Indians and Pakistanis. The effect for Black Africans may stem from selection into areas, but findings for Indians and Pakistanis are robust to sensitivity tests.