Ethnic Polarization and Human Development: The Conditional Effects of Minority Language Recognition

Abstract

The literature suggests ethnic diversity has a negative effect on development. Yet, we also know that government policies—e.g., recognizing multiple languages in minority-sizable areas—can attenuate these effects. In this paper, we ask: What are the socioeconomic implications of minority language recognition? We leverage a legal stipulation in Romania as a quasi-experiment: Minority languages are recognized as official in areas where the minority constitutes more than 20% of the population. We argue the recognition of minority languages builds social trust and facilitates efficiency in economic exchanges—mollifying the otherwise detrimental consequences of diversity. Using data at the municipality level, we find that in areas where only Romanian is recognized, ethnic diversity has a negative effect on development—a result consistent with the literature. This effect, however, is absent in areas where a minority language is recognized. The implications suggest that lowering the threshold for language recognition could promote even further development.