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Does Cultural Diversity Increase The Rate Of Entrepreneurship?

Russell Sobel, Nabamita Dutta () and Sanjukta Roy

No 10-12, Working Papers from Department of Economics, West Virginia University

Abstract: In the economic development literature, cultural diversity (for example, ethnolinguistic fractionalization) has been shown to have a negative impact on economic outcomes in many underdeveloped countries. We hypothesize that the impact of diversity on economic performance depends on the quality of a country's institutions. Under bad institutions diversity leads to conflict and expropriation, while under good institutions diversity leads to economic progress. A culturally diverse society or interaction among different cultures encourages exchange of, and competition between ideas and different world views. Under good institutions, this amalgamation of ideas and views leads to greater entrepreneurial initiatives. We show that higher levels of cultural diversity increase the rate of entrepreneurship in the presence of good institutions using evidence from the United States.

Keywords: Cultural Diversity; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: L26 O12 O17 P12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cul, nep-ent, nep-hrm, nep-mig and nep-soc
Date: 2010
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