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Does Cultural Diversity Increase The Rate Of Entrepreneurship?

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  • Russell S. Sobel

    (Department of Economics, West Virginia University)

  • Nabamita Dutta

    (Department of Economics, University of Wisconsin-La Crosse)

  • Sanjukta Roy

    (Department of Economics, West Virginia University)

Abstract

In the economic development literature, cultural diversity (for example, ethnolinguistic fractionalization) has been shown to have a negative impact on economic outcomes in many underdeveloped countries. We hypothesize that the impact of diversity on economic performance depends on the quality of a country's institutions. Under bad institutions diversity leads to conflict and expropriation, while under good institutions diversity leads to economic progress. A culturally diverse society or interaction among different cultures encourages exchange of, and competition between ideas and different world views. Under good institutions, this amalgamation of ideas and views leads to greater entrepreneurial initiatives. We show that higher levels of cultural diversity increase the rate of entrepreneurship in the presence of good institutions using evidence from the United States.

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Bibliographic Info

Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 10-12.

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Length: 32 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:wvu:wpaper:10-12

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Keywords: Cultural Diversity; Entrepreneurship;

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References

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  1. Sobel, Russell S., 2008. "Testing Baumol: Institutional quality and the productivity of entrepreneurship," Journal of Business Venturing, Elsevier, vol. 23(6), pages 641-655, November.
  2. Alberto Alesina & Reza Baqir & William Easterly, 1997. "Public Goods and Ethnic Divisions," NBER Working Papers 6009, National Bureau of Economic Research, Inc.
  3. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers, Tel Aviv - the Sackler Institute of Economic Studies 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  4. Virgil Storr, 2008. "The market as a social space: On the meaningful extraeconomic conversations that can occur in markets," The Review of Austrian Economics, Springer, Springer, vol. 21(2), pages 135-150, September.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(1), pages 60-85, March.
  7. Leeson, Peter T., 2005. "Endogenizing fractionalization," Journal of Institutional Economics, Cambridge University Press, Cambridge University Press, vol. 1(01), pages 75-98, June.
  8. Edward L. Glaeser & Raven Saks, 2004. "Corruption in America," NBER Working Papers 10821, National Bureau of Economic Research, Inc.
  9. Josh Lerner, 2002. "Boom and bust in the venture capital industry and the impact on innovation," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q4, pages 25-39.
  10. Edward L. Glaeser & Raven Saks, 2004. "Corruption in America," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2043, Harvard - Institute of Economic Research.
  11. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers, DELTA (Ecole normale supérieure) 90-12, DELTA (Ecole normale supérieure).
  12. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
  13. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers, Harvard - Institute for International Development 536, Harvard - Institute for International Development.
  14. Boettke, Peter & Fink, Alexander, 2011. "Institutions first," MPRA Paper 32093, University Library of Munich, Germany.
  15. James D . Gwartney & Randall G . Holcombe & Robert A . Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 59(2), pages 255-273, 05.
  16. Easterly, William, 2001. "Can Institutions Resolve Ethnic Conflict?," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 49(4), pages 687-706, July.
  17. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  18. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages 893-921, October.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Does Cultural Diversity Increase The Rate Of Entrepreneurship?
    by Ariel Goldring in Free Market Mojo on 2010-10-09 13:00:53
  2. Does Cultural Diversity Increase The Rate Of Entrepreneurship?
    by Nicholas Gruen in Club Troppo on 2010-10-16 00:32:22
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Cited by:
  1. Nabamita Dutta & Sanjukta Roy, 2013. "The changing face of culture: gauging the impact of a free media," European Journal of Law and Economics, Springer, Springer, vol. 36(1), pages 95-115, August.
  2. Nina Czernich, 2011. "The emergence of broadband internet and consequences for economic and social development," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, number 37, 8.

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