Is Diversity Bad for Economic Growth? Evidence from State-level Data in the US

Abstract

The paper examines the macroeconomic effects of social diversity in the United States. Employing a cross-sectional dataset for 48 states, we find mixed empirical evidence for the impact of diversity on Gross State Product (GSP) per capita growth: racial diversity reduces GSP growth, while linguistic diversity raises GSP growth. Our findings suggest that because English is used frequently by non-native speakers barriers to communications based on race are more pronounced and enduring than those based on linguistic differences. The results provide a justification for establishing 'weak ties' across diverse racial groups as a means to enhance economic performance.