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Does Cultural Diversity Increase The Rate Of Entrepreneurship?

Author

Listed:
  • 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.

Suggested Citation

  • Russell S. Sobel & Nabamita Dutta & Sanjukta Roy, 2010. "Does Cultural Diversity Increase The Rate Of Entrepreneurship?," Working Papers 10-12, Department of Economics, West Virginia University.
  • Handle: RePEc:wvu:wpaper:10-12
    as

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    File URL: http://be.wvu.edu/phd_economics/pdf/10-12.pdf
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    References listed on IDEAS

    as
    1. Leeson, Peter T., 2005. "Endogenizing fractionalization," Journal of Institutional Economics, Cambridge University Press, vol. 1(01), pages 75-98, June.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. 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.
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    5. Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
    6. James D . Gwartney & Randall G . Holcombe & Robert A . Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, vol. 59(2), pages 255-273, May.
    7. Alberto Alesina & Guido Tabellini, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 403-414.
    8. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
    9. Boettke, Peter & Fink, Alexander, 2011. "Institutions first," Journal of Institutional Economics, Cambridge University Press, vol. 7(04), pages 499-504, December.
    10. Easterly, William, 2001. "Can Institutions Resolve Ethnic Conflict?," Economic Development and Cultural Change, University of Chicago Press, vol. 49(4), pages 687-706, July.
    11. 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.
    12. 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;Society for the Development of Austrian Economics, vol. 21(2), pages 135-150, September.
    13. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    14. Edward L. Glaeser & Raven Saks, 2004. "Corruption in America," NBER Working Papers 10821, National Bureau of Economic Research, Inc.
    15. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

    Citations

    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 18:00:53
    2. Does Cultural Diversity Increase The Rate Of Entrepreneurship?
      by Nicholas Gruen in Club Troppo on 2010-10-16 05:32:22

    Citations

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    Cited by:

    1. Awaworyi Churchill, Sefa, 2015. "Fractionalization and Entrepreneurial Activities," EconStor Preprints 123723, ZBW - German National Library of Economics.
    2. Nabamita Dutta & Sanjukta Roy, 2013. "The changing face of culture: gauging the impact of a free media," European Journal of Law and Economics, Springer, vol. 36(1), pages 95-115, August.
    3. Joshua C. Hall & Dean Stansel & Danko Tarabar, 2015. "Economic Freedom Studies at the State Level: A Survey," Working Papers 15-07, Department of Economics, West Virginia University.
    4. repec:kap:sbusec:v:48:y:2017:i:3:d:10.1007_s11187-016-9796-8 is not listed on IDEAS
    5. repec:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1174-5 is not listed on IDEAS
    6. Nina Czernich, 2011. "The emergence of broadband internet and consequences for economic and social development," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 37, June.

    More about this item

    Keywords

    Cultural Diversity; Entrepreneurship;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P12 - Economic Systems - - Capitalist Systems - - - Capitalist Enterprises

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