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Ethnic Diversity's Downside.

In 88 B.C. King Mithridates VI of Pontus invaded Roman territory in Asia Minor. He encouraged Asian debtors to kill their Roman creditors. Happy to reduce their credit card bills, the Asians massacred 80,000 Romans.

Ethnic conflict is a tragic constant of human history, still very much in the news today, from the Balkans to Central Africa to Indonesia to Nigeria. Ethnic conflict has a peaceful political dimension as well as the more publicized violent dimension. Recently, the economics literature has studied the effects of ethnic conflict on economic development.

Ethnolinguistic fractionalization in the cross-country sample adversely affects income, growth, and economic policies, which is one explanation for Africa's poor growth performance. More ethnically diverse cities and counties in the United States spend less on public goods. States with more religious-ethnic heterogeneity show lower public support for higher education and lower high school graduation rates. In Kenya, there is less funding for primary schools in more ethnically diverse districts. Ethnic diversity also predicts poor quality of government services. Linguistic or religious diversity leads to greater political instability, which in turn leads to higher government consumption. In U.S. cities, there is a link from ethnic diversity to bloated government payrolls. Ethnically polarized nations react more adversely to external terms of trade shocks. More foreign aid proceeds are diverted into corruption in more ethnically diverse places. Ethnic homogeneity raises social capital, or trust, which in turn i s associated with faster growth and higher output per worker. The finding that ethnic heterogeneity lowers trust is confirmed with both U.S. data and cross-country data. In the United States, greater ethnic heterogeneity makes participation in social clubs less likely, which is consistent with the idea that there is not much association across groups. Several decades ago, scholars noted that "cultural and ethnic heterogeneity tends to hamper the early stages of nation-building and growth."

William Easterly, a World Bank economist, in Economic Development and Cultural Change (July 2001)

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Title Annotation:from 'Economic Development and Cultural Change'
Author:Easterly, William
Publication:The Wilson Quarterly
Article Type:Brief Article
Geographic Code:00WOR
Date:Jan 1, 2002
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