Does Diversity Reduce Freedom or Growth?

The founding father of Singapore, Lee Kuan Yew, credits ‘social discipline’ for the phenomenal economic rise of his country (Sen, 1999). Countries such as Singapore apparently demonstrate that autocratic measures are probably necessary, particularly in culturally fractionalized societies for creating the social stability necessary for economic growth (Colletta et al., 2001). Such thinking informs the so-called “Asian model” (Diamond, 2008).1 Recent studies, particularly in economics, support the logic (Alesina et al., 2006 and Easterly et al., 2006). According to these scholars, the more congruent territorial borders are with nationality, the better the chances for good economic policy to appear endogenously from within these societies because social cohesion determines good institutions and policies for development (Banerjee et al., 2005 and Easterly, 2006b). This paper addresses the question of whether or not social diversity hampers the adoption of sound economic policies, including institutions that promote property rights and the rule of law. We also examine whether democracy conditions diversity’s effect on sound economic management, defined as economic freedom, because the index of economic freedom is strongly associated with higher growth and is endorsed by proponents of the ‘diversity deficit’ argument (Easterly, 2006a).2

…Using several measures of diversity, we find that higher levels of ethno-linguistic and cultural fractionalization are conditioned positively on higher economic growth by an index of economic freedom, which is often heralded as a good measure of sound economic management. High diversity in turn is associated with higher levels of economic freedom. We do not find any evidence to suggest that high diversity hampers change towards greater economic freedom and institutions supporting liberal policies.

Paper here. The data is a panel from 116 countries covering 1980–2012 so this doesn’t rule out a negative long-run effect but it is prima facie evidence that diversity need not reduce freedom or growth.