Economic Benefits of Ethnolinguistic Diversity: Implications for ...

The negative effects were mainly explained in terms of the hypothesized effects of diversity upon political choices. Other studies, however, have shown that ethnic diversity is not “guilty as charged” (Collier, 2001, p. 2) and that the argument of ethnic diversity being dysfunctional is not well-founded. The scholars noticed that there are certain circumstances, such as the existence of democratic institutions and higher income levels, under which the negative impact of diversity is mitigated or even reversed (Alesina & La Ferrara, 2004; Collier, 2001; Easterly, 2001). Moreover, some studies, which were conducted on the level of cities, have proven that ethnic diversity might have productivity-enhancing effects (Florida, 2002a, 2002b; Ottaviano & Peri, 2004).

Therefore, some of the studies conducted in the field of political economy imply that there are certain moderating variables that influence the relationship between diversity and economic performance. Those variables determine whether ethnic diversity would have a positive or negative impact on economic performance. I departed from that point and decided to conduct a thorough search for the moderators of the positive relationship between ethnolinguistic diversity and economic outcomes.

However, for the purpose of this study, the economic outcomes are not defined in terms of economic growth, as it has been done in the previous studies, but in terms of the level of innovation. I point to innovation as a channel through which ethnolinguistic diversity might lead to higher economic performance. The fundamental idea of the study is that ethnolinguistic diversity might increase the levels of creativity, openness to change, and entrepreneurship, and it might thus increase the overall level of innovation for countries.²

Theoretically, the increases in creativity associated with ethnolinguistic diversity come from the interaction between diverse individuals, which stimulates the generation of novel ideas. The increases in the openness to change come from the exposure to different cultures, which broadens the horizons of the people and makes the people more accustomed to difference and, therefore, more open to both new trends and change.