Summary: The model of diversity presented helps to explain why it can both hinder or promote economic development. More diversity could increase communication cost but at the same time creates additional options for mutual learning which supports innovations. Incorporating into the model subjective characteristics of the economic agents explains why alienation indices are significant in the growth regressions. The model stresses endogeneity of diversity.
Empirical analysis based on 2002 and 2010 population censuses revealed the main factors which defined ethnic diversity change in Russian regions.
There is an optimal diversity arising from interaction costs and benefits of diversity. Other critical factors include propensity to rent seeking activity and agents’ alienation level;
Between the census of 2002 and that of 2010 in most regions and in Russia as a whole the level of ethnic heterogeneity increased and sustained the economic growth;
The factors of growing heterogeneity were international and inter-regional migration as well as the natural growth of population. The latter was negative in most regions of Russia and largely affected the main ethnic groups.
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This presentation happened 2 September 2019, Russia, Sochi at 27th Inforum Conference.
The conference & materials: https://ecfor.ru/27th-inforum-world-conference/
Playlist with the other videos from the conference: https://www.youtube.com/playlist?list=PLJBJFs8UgQgpmWWFzqw87jdwOBQXQmLfu
Inforum’s site: http://www.inforum.umd.edu/
Inforum, or Interindustry Forecasting at the University of Maryland, was founded nearly 50 years ago by Dr. Clopper Almon, now Professor Emeritus of the University. It is dedicated to improving business planning, government policy analysis, and the general understanding of the economic environment.
The host side was the Institute of Economic Forecasting of the Russian Academy of Sciences. IEF RAS specializes in fundamental, applied and exploratory scientific research in the field of analysis and forecasting of the socio-economic prospects of Russia and its regions, and the development of recommendations and proposals with a goal to improve the quality of economic policy in Russia. The site is https://ecfor.ru.
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Notes:
Diversity: groups that are or/and aware of being different;
More cultural diversity. Two sides:
— variety of cultures, opportunities for sharing and learning from others;
— cultural differences: difficult to understand, possible conflicts
Alberto Alesina & Eliana La Ferrara «ETHNIC DIVERSITY AND ECONOMIC PERFORMANCE», 2005
«Conflict of preferences, racism, prejudices often lead to policies which are suboptimal from the point of view of society as a whole, and to the oppression of minorities which may then explode in civil wars or at least in disruptive political instability».
«But an ethnic mix also brings about variety in abilities, experiences, cultures which may be productive and may lead to innovation and creativity. The United States are the quintessential example of these two faces of racial relations in a “melting pot”».
Motivation:
A simple model comparing collaboration costs and benefits of diversity;
Endogenous diversity: factors contributing to the optimal diversity.
In a wider sense:
Why diversity indexes are significant in growth regressions (?): considering differences between agents in the model.
Base model (Suslov N. Optimal diversity in socio-economic system: formal aspects. Proceedings of IX Moscow international conference on operation research (ORM2018). Volume II, Moscow, October, 22-27, 2018, pp. 229-223 – in Rus. )
Rent seeking activities require spending real resources (Tullock, 1967) that are subtracted from the total volume.
Production process creates a common result / prize (administrative rent). Or this result / prize may come from the outside.
Every agent has a limited resource to use in production that generates labor income or to rent out in order to get rent income.
The agents are grouped homogeneously.
In the long run, diversity (as a number of homogeneous groups) has a positive impact on productivity.
