Economic Benefits of Ethnolinguistic Diversity: Implications for ...

The results of Collier’s study (2001) showed that the ethnically heterogeneous countries have a higher productivity of private capital than the homogeneous countries. At the same time, however, they have a lower productivity of public capital. The productivity of public capital is 10% lower in the ethnically diverse society than in the ethnically homogeneous society. Simultaneously, the productivity of private capital is 5% higher in the ethnically diverse society than in the more homogeneous society. Collier argued that the two effects offset each other because the private capital stock is usually larger than the public capital stock; at the end, subsequently, ethnic diversity has no adverse effects on growth.

As far as the risk of conflict, Collier’s study (2001) showed that fractionalization actually makes societies safer, while dominance increases the risk of a violent conflict. His explanation was based on the assumption that the causes of civil wars are economic in nature, rather than on identity preferences. This assumption is derived from an earlier study conducted by Paul Collier and Anke Hoeffler (1998, 2000), which provides empirical evidence that the risk of civil conflict is greatly influenced by the dependence on primary commodities. When two societies are compared with otherwise mean characteristics, the risk of conflict in the society with no primary commodity export is less than one percent, while it is 23% in a society where such exports constitute one fourth of the gross domestic product (GDP).

Collier brought forward the example of Ethiopia to illustrate how economic interests, rather than ethnic identities, shape the behavior of different ethnic groups. In Ethiopia, the Eritrean secession gathered together nine different ethnolinguistic groups into a common political community, at the same time splitting the Tigrini ethnolinguistic group between Eritrea and Ethiopia.

Collier (2001) argued that the results of his study pointed to specific policy implications. He stated that “contrary to the apparent implication of Easterly and Levine and Alesina et al., ethnic diversity is not, in general, problematic for economic policy” (p. 19) and, therefore, the international community has a stronger interest than currently recognized in preserving large, multiethnic states like Russia, Indonesia, and Nigeria.