The Role of Linguistic Diversity in Economics

M. A. Caraballo () and E. M. Buitrago ()
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M. A. Caraballo: University of Seville, Economics and Economic History Department
E. M. Buitrago: University of Seville, Applied Economics III Department

Chapter Chapter 4 in The Palgrave Handbook of Economics and Language, 2026, pp 95-125 from Springer

Abstract: Abstract This chapter explores the main indices used in the economic literature to measure linguistic diversity, the relationships between such indices, and their principal applications in economics. On the one hand, the chapter describes those indices that deal with two dimensions of diversity: variety (the number of languages spoken) and balance (the distribution of speakers across languages). Particular attention is paid to fractionalization, since it is one of the most widely used indices in studies linking diversity to economic performance. Indices from the ecological literature, such as the Shannon entropy index and Hill’s diversity index, are also examined. None of these indices consider the (dis)similarities between languages. To overcome this issue, several measures of linguistic distances, including lexicostatistical, Levenshtein, and cladistic distances, are discussed. On the other hand, this chapter covers the polarization indices, which appear to be more capable of explaining civil and social conflicts. Likewise, throughout the chapter we analyze how these indices have been employed to explain social and economic outcomes, such as economic growth, social cohesion, and quality of institutions. This comprehensive review of the linguistic diversity indices highlights the critical role of precise measurement in designing effective policies for linguistically diverse societies.

Date: 2026
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DOI: 10.1007/978-3-031-88240-1_4

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