Ethnic Diversity and Economic Performance

We survey and assess the literature on the positive and negative e.ects of ethnic diversity on economic policies and outcomes. Our focus is on communities of di.erent size and organizational structure, such as countries, cities in developed countries, villages and groups in developing countries. We also consider the endogenous formation of political jurisdictions and we highlight several open issues in need of further research, in particular the endogenous formation of ethnic identity and the measurement of ethnic diversity. *We thank Roger Gordon, David Laitin, John McMillan and two anonymous referees for very useful comments. Angelo Mele provided excellent research assistance. Alesina is grateful to the NSF for financial support through a grant to the NBER. This paper is part of the Polarization and Conflict Project CIT-2-CT-2004-506084 funded by the European Commission-DG Research Sixth Framework Programme. This article reflects only the authors’ views and the Community is not liable for any use that may be made of the information contained therein.