Culture, Linguistic Diversity, and Economics

This chapter examines how cultural similarities (or differences) represented by common language roots affect economic activities. When individuals share some common linguistic repertoires, they are more inclined to develop commercial relationships and conduct business transactions than in the absence of such commonalities. The link between language, culture, and economic activity is confirmed by the burgeoning empirical research showing that common cultural and linguistic roots enhance trust between countries, which in turn influence trade, migrations, investment, growth, public goods, and many other economic issues. We study possible approaches to measure various aspects of cultural, linguistic, and ethnolinguistic (dis)similarities, but focus mainly on linguistic heterogeneity. Such measures also take into account the size distribution of distinct linguistic groups within a society. We give some examples of how diversity influences international trade, migrations, and literary translations. Other examples can be found in Chapter 18 in this volume by Montalvo and Reynal-Querol. Diversity has often led to standardization, which may increase economic efficiency, but may also result in disenfranchising linguistic groups within a country (or within a group of countries such as the European Union) and produce negative outcomes. © 2014 Elsevier B.V.