Ethnic Diversity and Growth: Revisiting the Evidence

Authors: José García-Montalvo and Marta Reynal-Querol

The Review of Economics and Statistics, Vol. 103, No 3, 521-532, July, 2021

The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data finds a negative, or statistically insignificant, relationship. However, analysis at city level finds a positive effect of diversity on wages and productivity. Generally, there is a trade-off between the economic benefits of diversity and the costs of heterogeneity. Using cells of fixed size we find that the relationship between diversity and growth is positive for small geographical areas. In the case of Africa, we argue that the explanation is the increase in trade at the boundaries between ethnic groups due to ethnic specialization.

This paper originally appeared as Barcelona School of Economics Working Paper 992