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Does Cultural Diversity Increase The Rate Of Entrepreneurship?

  • 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)

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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File URL: http://www.be.wvu.edu/phd_economics/pdf/10-12.pdf
File Function: First version, 2010
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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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  1. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
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