In this chapter, Quentin Grafton, Stephen Knowles and Dorian Owen examine the implications for productivity arising from the level of social diversity along a variety of dimensions, including ethnic, linguistic and religious differences and inequalities between rich and poor. Their basic intuition is that human beings tend to associate and communicate most readily with people similar to themselves, and their hypothesis is therefore that "social divergence" generates social barriers to communication among groups, inhibiting the diffusion of knowledge and lowering the level of productivity in the economy. As a consequence, the more diverse the society and the greater the number of distinct social groups, the higher are the communication costs and the greater are the barriers to the exchange of ideas and innovation.
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