Total Factor Productivity, Per Capita Income and Social Divergence

The paper introduces the concept of social divergence, defined as the social barriers to communication and exchange between individuals and groups within a society, and analyses its impact on total factor productivity and per capita income. Using a cross section of 27 developing countries, total factor productivity and per capita income are separately regressed on measures of social divergence that include the distribution of personal expenditures, ethnolinguistic diversity, religious diversity and an educational Gini coefficient. The results indicate that higher levels of social divergence are associated with both statistically and economically significantly lower levels of total factor productivity and per capita income.