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Ethnic Diversity and Local Economies

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  • Yonatan Dinku
  • Dereje Regasa

Abstract

The effect on economic outcomes of ethnic diversity remains debatable. Some view ethnic diversity as a deterrent of development, whereas others consider it a source of innovation and productivity, which can be translated into a higher level of development. This study aims to shed further light on the issue. Applying instrumental variables estimation to district‐level data, we find that ethnic diversity has a significant positive association with nighttime light intensity, which is used as a proxy for level of economic activity. The finding is robust to alternative specifications. Our finding suggests that centuries of interethnic contacts and coexistence may have helped ethnically diverse communities to gain experimental knowledge of the diverse beliefs and social practices and transition it into better economic outcomes.

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  • Yonatan Dinku & Dereje Regasa, 2021. "Ethnic Diversity and Local Economies," South African Journal of Economics, Economic Society of South Africa, vol. 89(3), pages 348-367, September.
    • Handle: RePEc:bla:sajeco:v:89:y:2021:i:3:p:348-367
    DOI: 10.1111/saje.12286
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