How Ethnic Diversity Affects Economic Growth

This paper investigates the empirical relationship between ethnic diversity, polarization, and economic growth. Ethnicity is assumed to affect economic growth through a number of possible transmission channels that are generally included in cross-country growth regressions. This paper provides an extensive empirical analysis shedding light on the various sources through which ethnic diversity and polarization affects economic growth indirectly. It advances and empirically establishes the hypothesis that ethnic diversity has a strong direct negative impact on economic growth, whereas ethnic polarization has non-negligible indirect economic effects through the specified channel variables. (C) 2014 Elsevier Ltd. All rights reserved.