Economic Benefits of Ethnolinguistic Diversity: Implications for ...

Currently, the fallacious popular orthodoxy has encouraged “radical social and political engineering, involving population movements and intricate border redesign and secession” in order to create ethnically more homogeneous, and thus allegedly more viable, states. Collier contended that the results of his study entailed contrary policy implications: fractionalized societies are viable and secession should be discouraged.

The study of Collier (2001) shed a new light on the discussion of ethnic diversity and its economic impact. It demonstrated that, under certain circumstances, the negative impact of ethnic diversity is eliminated. Furthermore, it showed that ethnic diversity may even have a positive impact on the economic outcomes. This new voice in the discussion drew more attention to the potential benefits of ethnic diversity. Despite the prevailing orthodoxy that still perceives ethnic diversity as an overall cost to the society, scholars are now more willing to recognize the positive potential of ethnic diversity.

In a recent study, Alesina and Eliana La Ferrara (2004) presented a model in which ethnic diversity constitutes both a cost and a benefit to the economy. It was a different approach from the initial one presented by Alesina and Spolaore (2003), where ethnic diversity was equated only with costs to the society because of the differences in preferences for public goods and policies. In 2004, the authors presented a position that recognizes that ethnic diversity, under certain circumstances, can also have a positive impact on the economy through gains in productivity. “Heterogeneity has evident potential costs, but an ethnic mix also brings about variety in abilities, experiences and cultures, which may be productive and may lead to innovation and creativity” (Alesina & La Ferrara, p. 11).

Alesina and La Ferrara (2004) presented two recent studies conducted on the level of cities as a part of the support for the argument that diversity has productivity-enhancing effects. In the study conducted by Richard Florida (2002a, 2002b), the amenities and diversity of U.S. cities is presumed to attract higher human capital. Florida constructed imaginative measures of diversity that are not directly related to ethnicity but include the share of gay and lesbian households, diversity of night life, arts, and so forth. The findings of his study showed that places that are high on diversity indeed attract a higher level of human capital.