Poor countries tend to stick to the negative side of diversity only
Diversity comes at a cost. Heterogeneity of preferences, prejudices and racism can lead to choices that do not benefit society. Oppression against minorities affects individual opportunities and tends to trigger political and social conflicts and instabilities.
In the economy, Alesina and La Ferrara are two big names who tried to understand the influence of diversity. In an article, they argued that more diverse countries are more likely to experience worse political management and greater economic challenges (“Ethnic Diversity and Economic Perfomance”, 2005).
The academic literature highlights that the variability of preferences makes decision making difficult. Less homogeneous countries may dominate one population group over the others. Those who have power make rules that benefit them.
Altruism and benevolence have difficulties in breaking ethnic lines. Thus, the efficient provision of public goods and social policies aimed at the development of marginalized groups is compromised.
Alesina, Baqir and Easterly showed that American cities with greater ethnic diversity have a lower supply of public goods such as education, roads, sewers and garbage collection (“Public Goods and Ethnic Divisions”, 1999).
In addition, participation in social activities also tends to be negatively affected in ethnically fragmented locations (“Participation in Heterogeneous Communities”, 2002).
Through interviews, Luttmer found a positive relationship between support for welfare policies and the percentage of the population who were of the same race as the interviewee in the community (“Group Loyalty and the Taste for Redistribution”, 2001).
In this context, the dominance of certain groups over other compatriots can affect progress and increase the marginalization of part of the population. In turn, social exclusion negatively impacts economic performance.
Easterly and Levine found that ethnic fragmentation explains a significant part of African countries' differences in public policies and economic indicators (“Africa’s Growth Tragedy: Policies and Ethnic Divisions”, 1997).
However, diversity also has benefits. According to the first article of the Unesco Universal Declaration on Cultural Diversity: “Cultural diversity is as necessary for mankind as biological diversity for nature”.
Variability in skills and differences in perception have the potential for positive impacts on productivity and innovation. However, in order to manage diversity, a well-structured institutional set is needed. Differences in worldviews can become a recurring source of confusion.
Case studies suggest that diverse groups perform better when there are well-defined rules to limit possible conflicts arising differences of opinion.
Differences in perceptions, in conjunction with cognitive ability, can also affect the resolution of complex problems. Hong and Page formalized a theoretical model to analyze this relationship. Under certain conditions, less diverse groups, but with a high ability to solve problems, perform worse than heterogeneous groups with limited ability (“Diversity and Optimality”, 1998).
In this context, rich countries have better institutions and thus benefit the positive side of diversity. The poor tend to stick to the negative only. In these nations, the rules of the game of life tend to be those that meet the desires of the dominant group.