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Ethnic Diversity and Growth: Revisiting the Evidence

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  • Montalvo, Jose G
  • Reynal-Querol, Marta

Abstract

The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data finds a negative, or statistically insigni cant, relationship. However, research at the city level usually fi nds a positive relationship between diversity and wages/productivity. Generally, the trade-off between the economic bene fits 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 fi 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.

Suggested Citation

  • Montalvo, Jose G & Reynal-Querol, Marta, 2017. "Ethnic Diversity and Growth: Revisiting the Evidence," CEPR Discussion Papers 12400, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12400
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    References listed on IDEAS

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    1. Jessie Bakens & Peter Mulder & Peter Nijkamp, 2013. "Economic Impacts Of Cultural Diversity In The Netherlands: Productivity, Utility, And Sorting," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 8-36, February.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    3. Alberto Alesina & William Easterly & Janina Matuszeski, 2011. "Artificial States," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 246-277, April.
    4. Nathan, Max, 2011. "The long term impacts of migration in British cities: diversity, wages, employment and prices," LSE Research Online Documents on Economics 33577, London School of Economics and Political Science, LSE Library.
    5. Gianmarco I.P. Ottaviano & Giovanni Peri, 2016. "The economic value of cultural diversity: evidence from US cities," World Scientific Book Chapters, in: The Economics of International Migration, chapter 7, pages 229-264, World Scientific Publishing Co. Pte. Ltd..
    6. Porteous, Obie C., 2015. "High Trade Costs and Their Consequences: An Estimated Model of African Agricultural Storage and Trade," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205776, Agricultural and Applied Economics Association.
    7. Maxim Pinkovskiy & Xavier Sala-i-Martin, 2016. "Lights, Camera … Income! Illuminating the National Accounts-Household Surveys Debate," The Quarterly Journal of Economics, Oxford University Press, vol. 131(2), pages 579-631.
    8. Max Nathan, 2011. "The Long Term Impacts of Migration in British Cities: Diversity, Wages, Employment and Prices," SERC Discussion Papers 0067, Spatial Economics Research Centre, LSE.
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    Cited by:

    1. Mª Ángeles Caraballo & Eva Mª Buitrago, 2019. "Ethnolinguistic Diversity and Education. A Successful Pairing," Sustainability, MDPI, Open Access Journal, vol. 11(23), pages 1-18, November.

    More about this item

    Keywords

    Economic Growth; Ethnicity; Scale;

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