The Correlation Between Diversity And Poverty

A 2003 article in the Journal of Economic Growth quantified the degree of ethnic and cultural diversity in the various nations of the world, making a range of statistical analyses possible. For this article, we did a study to calculate the correlation between the ethnic fractionalisation index given in the linked article and GDP per capita (the most common measure of wealth), for the sake of investigating the link between diversity and poverty.

For this study we took data for 154 different nations and entered them into a Statistica database for the purposes of calculating a correlation matrix. There were three parts to this data: the first was a measure of the ethnic diversity of the country, the second was a measure of the cultural diversity of the country, and the third was a measure of the average personal wealth of the country.

The first two parts were taken from the 2003 paper linked in the opening paragraph. The third part, the measure of average personal wealth, was taken from International Monetary Fund data regarding the GDP per capita of all countries (measured on a price purchasing parity basis).

If diversity really is a strength, then there will be a positive correlation between ethnic and cultural diversity and wealth. This would happen if diversity led to higher education levels or if it inspired entrepreneurialism.

If, on the other hand, diversity is not a strength but a weakness, then there will be a negative correlation between ethnic and cultural diversity and wealth. This would happen if diversity made it easier to divide and conquer the working class for the sake of driving down their wages.

When a correlation matrix is calculated, a strong link between diversity and poverty is apparent. This can be seen from the fact that there is a significant negative correlation of -0.36 between ethnic diversity and gross domestic product per capita. This means that a country’s score on the ethnic fractionalisation index predicts how wealthy it will be: the more diverse, the less wealthy.

There is also a significant negative correlation between cultural diversity and GDP per capita, although this is weaker at -0.18.

There are several reasons to think that diversity leads to poverty.
Diversity makes it harder for workers to organise, because a plurality of languages and cultures makes it more difficult to find common points around which to rally. Diversity also leads to mistrust, because the social signals that people consider to be signs of trustworthiness are either not present as often, or presented in a form that is not understood as readily. It also leads to corruption, as people are more readily inclined to cheat others if those others lack similarities.

There could, however, be underlying factors at play. If we add the fourth factor of IQ to the correlation matrix, we can see that there is also a correlation of 0.65 between IQ and GDP per capita, and even a correlation of -0.54 between IQ and ethnic diversity. So it might simply be that the reason for the correlation between diversity and poverty is that diverse places tend to be low IQ, and low IQ leads to poverty.

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