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A dissimilarity-adjusted index of ethnic diversity: Measurement and implications for findings on conflict, growth and trade

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  • Philipp Kolo

    (Georg-August University Göttingen)

Abstract

Existing indices of ethnic diversity are generally based on pre-defined groups, disregarding the (dis)similarities between them. This paper proposes an index that includes the dissimilarity in language, ethno-racial characteristcs and religion between groups. The resulting distance-adjusted ethno-linguistic fractionalization index (DELF) is based on highly disaggregated data on the language, ethnic and religious composition of groups and allows an assessment of differentiation between groups within and across countries. The DELF is subsequently applied by replicating some key studies on the effects of ethnic heterogeneity on economic outcomes. The results confirm the generally found growth-reducing effect of ethnic heterogeneity but also shows that this does not hold true for ethnic diversity in more developed countries. As regards the cultural distance between countries and its impact on trade, the DELF is, indeed, a very valuable measure of cultural affinity between countries, also showing this affinity affects trade flows in a positive way, especially of heterogenous goods.

Suggested Citation

  • Philipp Kolo, 2016. "A dissimilarity-adjusted index of ethnic diversity: Measurement and implications for findings on conflict, growth and trade," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 195, Courant Research Centre PEG.
  • Handle: RePEc:got:gotcrc:195
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    More about this item

    Keywords

    Composite Index; Conflict; Distance; Ethno-Linguistic Fractionalization (ELF); Growth; Trade;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F15 - International Economics - - Trade - - - Economic Integration
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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