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Journal of the Indiana Academy of the Social Sciences

Document Type

Article

Abstract

Previous studies have yielded mixed results on the impact of cultural diversity on economic performance. We find a positive relationship in the United States between cultural diversity and a comprehensive measure of human development that incorporates health, education, and income. We also disaggregate cultural diversity into three components including ethnicity, language, and religion. We find a positive relationship between human development and both religious and language diversity, and a negative relationship with ethnic diversity. These relationships are robust, using several alternative mathematical measures of diversity. Our results are consistent with diversity generating benefits from exposure to a variety of experiences, ideas, and skills while introducing costs due to difficulty in communication, difference in preferences, and conflict between polarized groups. We conclude that strong institutions are essential to maximize the benefits of diversity while mitigating the associated costs.

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