Ethnic Diversity and Poverty

We examine the relationship between ethnic diversity and poverty for a cross-sectional sample of 60 developing countries. We measure diversity using indices of ethnic and linguistic fractionalization, and measure poverty using the multidimensional poverty index (MPI), multidimensional poverty headcount (MPH), intensity of deprivation, poverty gap and poverty headcount ratio. We find that ethnic and linguistic fractionalization contributes to poverty levels. Specifically, we find that a standard deviation increase in ethnic fractionalization is associated with a 0.37, 0.83 and 0.77 standard deviation increase in the MPI, MPH and the intensity of deprivation, respectively. Moreover, a standard deviation increase in ethnic fractionalization is associated with between a 0.30 and 0.56 standard deviation increase in the population living below $1.90 and $3.10, the poverty gap at $1.90 and $3.10 a day and the headcount ratio at $1.90 and $3.10 a day. Similar results are also observed for linguistic fractionalization with standardized coefficients ranging between 0.31 and 0.91. We find that our results are robust to alternative ways to measure fractionalization and poverty as well as alternative approaches to address endogeneity.