Economic Growth in Culturally Diverse Nations

Abstract

In existing literature relating to the determinants of economic growth, such explanatory variables as income inequality and cultural diversity have been treated separately. In this chapter, we try to discuss their joint effects. Evidence from a broad panel of nations reveals somewhat ambiguous results in that economic growth is quite independent from the variables of inequality and cultural (linguistic and religious) diversity. But for the post-Cold War era, there is also an indication that religious diversity tends to retard growth in high-inequality nations and to encourage growth in low-inequality places. Besides, we find some evidence that supports the view that inequality tends to encourage growth in low religious diversity nations, but not in high religious diversity places. The estimated results show that higher religious diversity could become a source of productive factors contributing to economic growth for low-inequality nations; but in nations with high degrees of religious diversity, high inequality could seriously affect economic growth. In nations with low degrees of religious diversity, income inequality could generate higher economic growth since there are very few, if any, intercultural barriers within each religiously homogeneous nation.