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Ethnic diversity and growth: revisiting the evidence

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Abstract

The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data nds a negative, or statistically insignificant, relationship. However, research at the city level usually finds a positive relationship between diversity and wages/productivity. Generally, the trade-off between the economic benefits of diversity and the costs of heterogeneity implies that the relationship between diversity and growth depends on the size of the area used as the unit of observation. In this paper we perform a systematic analysis of the effect of the size of geographical units on the relationship between ethnic diversity and growth. We nd a positive relationship for small geographical areas and no effect for large areas and countries. There are potentially different mechanisms that can explain this result depending on the structure of the economy and its level of development. In the case of Africa, we argue that a possible explanation of the positive relationship between diversity and growth is the increase in trade at the boundaries between ethnic groups due to ethnic specialization.

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  • José Garcia Montalvo & Marta Reynal-Querol, 2017. "Ethnic diversity and growth: revisiting the evidence," Economics Working Papers 1585, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1585
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    2. Sefa Awaworyi Churchill & Michael Danquah, 2020. "Ethnic diversity and informal work in Ghana," WIDER Working Paper Series wp-2020-126, World Institute for Development Economic Research (UNU-WIDER).
    3. Dieu Ne Dort Talla Fokam & Paul Ningaye & Celestin Chameni Nembua, 2020. "Ethnic Diversity Management and Poverty in Developing Countries," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 19(1), pages 47-60, June.
    4. Chilosi, David & Nikolic, Stefan, 2021. "Vanishing borders: ethnicity and trade costs at the origin of the Yugoslav market," SocArXiv fsmch, Center for Open Science.
    5. Elizalde, Aldo & Hidalgo, Eduardo & Salgado, Nayeli, 2023. "Public good or public bad? Indigenous institutions and the demand for public goods," QUCEH Working Paper Series 23-01, Queen's University Belfast, Queen's University Centre for Economic History.
    6. Juan Felipe Riaño & Felipe Valencia Caicedo, 2024. "Collateral Damage: The Legacy of the Secret War in Laos," The Economic Journal, Royal Economic Society, vol. 134(661), pages 2101-2140.
    7. Eleonora Guarnieri, 2023. "Cultural Distance and Ethnic Civil Conflict," CESifo Working Paper Series 10609, CESifo.
    8. Pham, Huong Dien, 2017. "Do cultural factors alter the relationship between risk attitudes and economic welfare?," TVSEP Working Papers wp-003, Leibniz Universitaet Hannover, Institute for Environmental Economics and World Trade, Project TVSEP.
    9. Mª Ángeles Caraballo & Eva Mª Buitrago, 2019. "Ethnolinguistic Diversity and Education. A Successful Pairing," Sustainability, MDPI, vol. 11(23), pages 1-18, November.
    10. Vicente Rios & Beatriz Manotas-Hidalgo & Lisa Gianmoena, 2021. "Spatial Inequality, Civil Conflict and Cells: A Dynamic Spatial Probit Approach," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2110, Departamento de Economía - Universidad Pública de Navarra.
    11. Pablo Ponce & Nathalie Aguirre-Padilla & Cristiana Oliveira & José Álvarez-García & María de la Cruz del Río-Rama, 2020. "The Spatial Externalities of Tourism Activities in Poverty Reduction," Sustainability, MDPI, vol. 12(15), pages 1-17, July.
    12. Manotas-Hidalgo, Beatriz & Pérez-Sebastián, Fidel & Campo-Bescós, Miguel Angel, 2021. "The role of ethnic characteristics in the effect of income shocks on African conflict," World Development, Elsevier, vol. 137(C).
    13. N. I. Suslov & E. N. Isupova & A. I. Ivanova, 2022. "Ethnic Diversity in Russian Regions and Economic Growth: Theoretical Model and Its Approbation on Panel Data," Studies on Russian Economic Development, Springer, vol. 33(2), pages 149-156, April.
    14. 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.

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