Emerging Trends in The Social and Behavioral Sciences

Exploring Opportunities in Cultural Diversity

Item

Title

Exploring Opportunities in Cultural Diversity

Author

Laitin, David D.

Jeon, Sangick

Research Area

Culture

Topic

Culture and Society

Abstract

In economics and political science, there is evidence from large cross‐sectional datasets and field experiments that neighborhoods, villages, cities, and countries with higher levels of cultural diversity have lower levels of generalized trust, lower quality of public goods, and poorer economic performance. However, in social psychology, organizational behavior, and computer science, there is evidence that diverse populations are collectively better able to solve complex problems with creative solutions. The next generation of research, crucial for the globalized world that is undermining homogeneous communities, will utilize experimental research designs (such as those based on natural or quasi‐natural experiments, laboratory experiments, and randomized experiments in controlled natural settings) to better understand the mechanisms sustaining underperformance of diverse communities and to identify interventions that enable community members to take advantage of the problem‐solving promise of diversity to yield social and economic benefits.

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Identifier

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extracted text

Exploring Opportunities in
Cultural Diversity1
DAVID D. LAITIN and SANGICK JEON

Abstract
In economics and political science, there is evidence from large cross-sectional
datasets and field experiments that neighborhoods, villages, cities, and countries
with higher levels of cultural diversity have lower levels of generalized trust, lower
quality of public goods, and poorer economic performance. However, in social
psychology, organizational behavior, and computer science, there is evidence that
diverse populations are collectively better able to solve complex problems with
creative solutions. The next generation of research, crucial for the globalized world
that is undermining homogeneous communities, will utilize experimental research
designs (such as those based on natural or quasi-natural experiments, laboratory
experiments, and randomized experiments in controlled natural settings) to better
understand the mechanisms sustaining underperformance of diverse communities
and to identify interventions that enable community members to take advantage of
the problem-solving promise of diversity to yield social and economic benefits.

INTRODUCTION
Ethnic and cultural diversity imposes a paradox on society. On the one hand,
it is costly. When neighborhoods, villages, cities, and countries are comprised
of individuals with different beliefs and backgrounds, they tend to fractionalize and fight along those differences. At the same time, diversity in beliefs
and backgrounds is often functional, such that the very same heterogeneities
that generate conflict can also produce large gains in economic productivity and improve performance in intellective tasks such as problem solving,
innovation generation, and decision making. As Alberto Alesina and Eliana
La Ferrara point out, “New York and Los Angeles are among the two most
troubled American cities in terms of racial relations … [but] they are constant
producers of innovation in the arts and business” (2005, p. 762).
1. We are grateful to Scott Page and Charles O’Reilly for providing helpful feedback and sharing their
thoughts on the emerging trend described in this essay.
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

1

2

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

The next generation of social science research—partly motivated by theory
and partly motivated by its practical implications in a world of increasing
economic integration and cultural mixing—will likely clarify several puzzles
about diversity’s trade-offs. If diversity imposes both costs and benefits, what
is the net impact of diversity on the probability of social peace, the production of public goods, and economic growth? What kinds of interventions and
diversity management strategies can help multicultural groups and societies
minimize the costs and realize the benefits of heterogeneity?
Part of the reason these questions are currently difficult to answer is because
we know little about the benefits of diversity. This is even the case concerning diversity of factor endowments and the benefits to international trade
at the country level. Although theoretically demonstrated by David Ricardo
in 1817 (Ricardo 1817/1951) and repeatedly elaborated, refined, and tested,
a recent literature review by Nobelist Paul Samuelson (2001) reveals many
unanswered questions on whether those gains are actually realized in the
real world. No surprise that this is even more so concerning the gains from
within-country diversity. To be sure, theoretical and experimental research
on the productivity-enhancing effects of diversity illustrate that groups composed of more dissimilar people are more creative, better decision makers,
and superior problem solvers (e.g., Hoffman & Maier, 1961; Hong & Page,
2004). But there are very few large-N studies that have convincingly identified such gains from diversity. Results from the experimental literature might
still appear generalizable if they were particularly strong, but results are often
contradictory and fail to replicate across studies (Williams & O’Reilly, 1998).
Perhaps more problematically, the literatures on the costs and benefits of
diversity have developed largely in isolation of each other. Although in social
psychology, organizational behavior, and computer science there is a strong
recognition that diversity is immensely valuable for the prosperity and durability of societies (Page, 2007/2011), in political science and economics diversity is often characterized as exclusively costly, thought to lead to a range
of socially undesirable outcomes such as enhanced likelihood of civil conflict (Horowitz, 1985), the underprovision of public goods (Alesina, Baqir,
& Easterly, 1999), economic underdevelopment (Easterly & Levine, 1997),
social distrust (Putnam, 2007) and democratic instability (Rabushka & Shepsle, 1972). Such disciplinary divides have created narrow theories of diversity
that have not been fully useful for assessing the net value of diversity and
identifying viable strategies for not only minimizing the costs of diversity
but also realizing its benefits.
A new generation of researchers can draw on insights and innovative
research methods from multiple disciplines to reevaluate the case for diversity and develop a research program that has the potential to estimate the

Exploring Opportunities in Cultural Diversity

3

magnitude of diversity’s productivity-enhancing effects, identify the conditions under which they are best realized, and assess interventions designed
to manage both the costs and benefits of diversity. In the subsequent sections
we describe foundational and cutting-edge research on this topic. We also
discuss opportunities for impactful research and conclude with thoughts on
the practical importance of addressing puzzles about diversity’s trade-offs.
FOUNDATIONAL RESEARCH
THE BENEFITS OF DIVERSITY
In social psychology, organizational behavior, computer science, and economics, there is an increasing awareness that cultural diversity can be
beneficial for the well-being of communities and societies. Because cultural
diversity is often correlated with diversity in perspectives, skills, and
cognitive abilities, it is hypothesized that diversity generates large efficiency
gains in productivity and improves performance in intellective tasks such as
problem solving, knowledge creation, prediction generation, and decision
making (see Page, 2007 for a review). Commonly referred to as the “value in
diversity” hypotheses, this line of thought isolates (at least) two mechanisms
by which diversity improves group productivity: (i) by producing a variety
of perspectives and skills useful for problem solving and task completion,
and (ii) by creating the type of task-related conflict that leads to a more
complete consideration of the issues at hand (Hoffman & Maier, 1961;
Nemeth, 1986; O’Reilly, Williams, & Barsade, 1997).
These ideas are founded on early social psychology experiments that generally involved a group of subjects solving problems or completing tasks in the
laboratory under various treatment conditions. Hoffman’s (1959) and Hoffman and Maier’s (1961) experiments revealed that groups whose members
had more dissimilar personalities and backgrounds produced “higher quality solutions” to difficult problems under laboratory conditions. Triandis,
Hall, and Ewen’s (1965) and Kent and McGrath’s (1969) experimental studies demonstrated that group heterogeneity (in attitudes and gender) fosters
creativity. The experimental literature has been active since these pioneering
efforts, introducing new group treatment designs and often moving out of
the laboratory and into the field.
Many experiments identify productivity gains from diversity. Nemeth
(1986) finds that minority viewpoints improve group performance in several
different types of intellective tasks, including problem solving and decision
making. McLeod, Lobel, and Cox (1996) provide evidence that ethnic diversity improves creativity in a brainstorming task. Priem, Harrison, and Muir
(1995) show that cognitive conflicts lead to better group decisions. Watson,

4

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Kumar, and Michaelsen (1993) conduct a longitudinal study and show that
culturally homogenous groups are more productive than heterogeneous
groups in the short run, but in the long-run the difference converges and
heterogeneous groups perform better in certain types of intellective tasks
(for comprehensive reviews of the experimental literature see Mannix &
Neale, 2005; Milliken & Martins, 1996; Williams & O’Reilly, 1998).
Researchers have attempted to gain additional analytical leverage by formalizing arguments about individual-level heterogeneities and intellective
task performance. Hong and Page (2001/2004) propose a model in which
agents are characterized by a perspective-heuristic pair, where a perspective is
an agent’s internal representation of a problem, and a heuristic is an algorithm
that the agent employs to locate solutions. Together, a perspective-heuristic
pair determines an individual’s problem-solving capabilities, and aggregated at the group level, determines a group’s problem-solving capabilities.
Using this framework, Hong and Page show that if problems are sufficiently
difficult such that no one agent can solve the problem individually, groups
with diverse perspective-heuristic pairs outperform homogeneous groups
at problem solving, even when the latter are comprised of individually
higher ability problem solvers. In other words, diversity trumps ability (see
also Bendor & Page, 2013 for a related formulation). Lazear (1999) develops
a model in which diversity generates productivity gains when workers have
the ability to communicate and possess skills and knowledge sets that are
“relevant” and “disjoint.” In his model, diversity has diminishing marginal
returns and increasing marginal costs, implying an inverted-U-shaped
relationship between diversity and productivity. Alesina and La Ferrara
(2005) model the costs and benefits of diversity at the jurisdiction level and
show, among other things, that diversity increases productivity at higher
per capita output, where skill differentiation is likely to be more useful.
Despite a growing experimental and theoretical literature that suggests
diversity improves group performance, few scholars have empirically
identified such gains in a statistically convincing way at the aggregate level.
Ottaviano and Peri (2006) analyze data on wages and rents in US metropolitan areas between 1970 and 1990 and find that US-born individuals receive
higher wages and pay higher rents in areas with larger shares of foreign
born, suggesting that diversity increases productivity. Peri (2012) shows that
immigration has improved the total factor productivity across US states,
arguably by promoting efficient task specialization. However, the direction
of causality in these studies is ambiguous—is immigration the reason for
economic productivity, or did productivity attract immigrants by creating
economic opportunities? Because ethnic composition is endogenous to
economic performance, the results are difficult to interpret (see Alesina & La
Ferrara, 2005, p. 778, on this point). The management literature also provides

Exploring Opportunities in Cultural Diversity

5

evidence that diversity enhances productivity at the firm level (Hollowell,
2007; Kochan et al., 2003; Richard, McMillan, Chadwick, & Dwyer, 2003),
but these studies rely on observational data without controlling for omitted
factors that might affect both diversity and productivity. Because diversity
is not randomly assigned, these studies are unable to identify causal effects,
only correlations.
THE COSTS OF DIVERSITY
Although cultural diversity may bring about a mix of skills and perspectives
that is useful for collective task performance, there is evidence that ethnic
and cultural diversity complicates the group process, frequently leading to
emotional dissatisfaction, decreased communication, and interethnic conflict
(Pelled, Eisenhardt, & Xin, 1999; Tajfel, Billig, Bundy, & Flament, 1971; Tsui,
Egan, & O’Reilly, 1992). Diversity is thus a double-edged sword, producing
benefits in the form of greater economic productivity and costs in the form
of reduced social cohesion (Alesina & La Ferrara, 2005). As a result, many
scholars argue that even if diversity can be beneficial, it will be so only when
it is well managed (Page, 2007; Swann, Polzer, Seyle, & Ko, 2004).
There are two prominent explanations for why diversity might reduce
social cohesion and prospects for interethnic cooperation. At the most
basic level, individuals may possess a cognitive tendency to create inand out-group distinctions based on salient, ascriptive differences, attach
positive utility to members of one’s own group, and attach negative or no
utility to members of an out-group (Tajfel et al., 1971). According to this
psychological theory, ethnic tensions are the result of a taste for racial discrimination and in-group favoritism. A second channel by which diversity
may affect prospects for cooperation is by making it difficult to implement effective social sanctions and thereby deter opportunistic behavior.
Because coethnics generally share a common language and culture and
enjoy relatively dense social networks, they may simply be better equipped
to monitor socially harmful behavior and enforce cooperation (Fearon &
Laitin, 1996; Habyarimana, Humphreys, Posner, & Weinstein, 2007). Under
this rational choice framework, ethnic tensions are not the result of inherent
animosities but rational incentives for individuals to interact preferentially
with in-group members.
In political science and economics, the potential costs of diversity are well
known, and include increased likelihood of civil conflict (Esteban, Mayoral,
& Ray, 2012; Horowitz, 1985; Montalvo & Reynal-Querol, 2005), labor market discrimination (Adida, Laitin, & Valfort, 2010; Becker, 1957; Bertrand &
Mullainathan, 2004), lower levels of generalized trust (Alesina & La Ferrara,
2002; Glaeser, Laibson, Scheinkman, & Soutter 2000), the underprovision of

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

public goods provision (Alesina, Baqir, & Easterly, 1999; Miguel & Gugerty,
2005), low economic growth (Alesina, Devleeschauwer, Easterly, Kurlat, &
Wacziarg, 2003; Easterly & Levine, 1997), and democratic instability (Dahl,
1971; Rabushka & Shepsle, 1972), among others. Importantly, however, the
quality of evidence differs across topics. Some of this research—such as
those studying the impact of diversity on civil conflict, economic growth,
and democratic instability—rely heavily on cross-country comparisons. But
because ethnic diversity across countries is correlated with a number of
nontrivial characteristics—such as per capita income and latitude—such
studies have not fully disentangled the effects of diversity. Moreover, there
is a debate as to whether plural societies are especially prone to higher
levels of ethnic conflict and lower levels of democratic performance. Lijphart
(1977) shows that under certain institutional frameworks, heterogeneity
is not a threat to democracy. Fearon and Laitin (1996) show that instances
of interethnic cooperation outnumber instances of interethnic violence
2000 to 1 in Africa and the post-Soviet world in the first generation after
independence—regions thought to be particularly prone to ethnic violence.
Fearon and Laitin (2003) show that in cross-country regressions, the correlation between ethnic fractionalization and civil war disappears after
controlling for per capita income. Nonetheless, the prevailing belief is that
diversity poses serious challenges to the well-being of societies. Banerjee,
Iyer, and Somanathan, for example, write:
“One of the most powerful hypotheses in political economy is the notion that
social divisions undermine economic progress, not just in extremis, as in the
case of civil war, but also in more normal times”
(2005, p. 639)

CUTTING-EDGE RESEARCH
Several working papers and recent publications make contributions to the
study of diversity’s opposing effects. They represent advances because they
either analyze the interplay between diversity’s costs and benefits, thus permitting a proper assessment of diversity’s net gains, or produce statistically
convincing estimates of diversity’s costs and benefits using research designs
capable of identifying causal effects. Some of this work also makes progress
toward revealing the specific dimensions of cultural diversity (e.g., ethnic,
linguistic, religious, or birthplace) that create gains in productivity and intellective task performance.
A working paper by Alesina, Harnoss, and Rapoport (2013), for example,
shows that—unlike measures of ethnolinguistic fractionalization—birthplace

Exploring Opportunities in Cultural Diversity

7

diversity has strong positive effects on economic development across countries. The authors argue that people with different countries of births are
more likely to exhibit the type of cognitive and functional differences useful
for intellective task performance than people of different skin color and languages, as people born in different countries have generally been exposed
to different education systems, cultural values, and life experiences. To
address endogeneity, Alesina et al. take an instrumental variables approach
that involves specifying a gravity model of migration to predict birthplace
diversity based on a set of exogenous bilateral geographic and cultural
variables. Ortega and Peri (2012) rely on a similar identification strategy
to estimate the productivity gains from immigration in a sample of 147
countries. They also find productivity gains from immigration, reporting
that a 10 percentage-point increase in the share of foreign born is associated
with 130–170% increase in per capita income. Their results also suggest
that immigration has been more beneficial for economic performance than
openness to trade, and that there are two avenues by which immigration
might improve economic performance: by increasing total factor productivity and stimulating innovation. Ager and Bruckner (2011) explore the
impact of immigration in the United States during the period of mass
migration (1870–1920) and show that counties that became more culturally
fractionalized (i.e., with many new groups) experienced gains in output
per capita, whereas counties that became more polarized (i.e., with two
contending groups) experienced reductions in output. Here, we see variation in the demographics of diversity have different implications for social
outcomes.
Ashraf and Galor (2013) model both the social costs and the economic benefits of diversity in a single model, with diminishing marginal returns to both
diversity and homogeneity. The model thus predicts an inverted-U-shaped
relationship between diversity and economic performance. Consistent with
this prediction, the authors show that comparative economic development in
the precolonial and modern eras is a nonmonotonic function of genetic diversity. According to this line of thought, the high degree of diversity among
African populations and the low degree of diversity among Native American
populations has been detrimental for economic development, while the intermediate level of diversity in European and Asian populations has been beneficial. To address endogeneity, Ashraf and Galor use an instrument based
on the well-established “out of Africa” theory, which posits that the human
species originated in East Africa 150,000 years ago and thereafter proceeded
to inhabit the entire globe in a stepwise migration process, with subgroups
leaving their initial settlements to create new settlements further away, taking
with them only a subset of the overall genetic diversity found in their original
settlements. Prehistoric migratory distance from East Africa thus has a strong

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

negative effect on genetic diversity. And because migratory distance from
East Africa should have no direct effect on economic development, Ashraf
and Galor are able to employ an exogenous measure of diversity to identify
its causal effects on productivity.
Experimental work by Jeon (2014a) also identifies a humped-shaped effect
of diversity. Using a controlled problem-solving competition in Nairobi,
Kenya, with random assignment of subjects into ethnically homogeneous
and heterogeneous groups, he assesses two classes of strategies for managing
diversity: (i) assimilationist strategies, which encourage the construction of
superordinate social identities (e.g., based on a team, religion, or nation) and
(ii) multiculturalist strategies, which entail the construction of shared intergroup beliefs that acknowledge the value of each group’s culture. Results
are mixed. The multicultural prime improves intellective task performance
in ethnically divided groups, but only the assimilation prime improves
prospects for interethnic cooperation. Hoogendoorn and van Praag (2012)
also consider the nonmonotonic effects of diversity using a field experiment
with 550 business students who were asked to create real companies as
part of their curriculum. The authors experimentally manipulate ethnic
composition of student teams and find that a threshold level of diversity
is needed before any gains from heterogeneity are detectable in sales and
profits.
Jha (2007, 2013) considers the effect of economic complementarities across
ethnic groups, or, ethnic complementarities, on prospects for ethnic tolerance
and peaceful coexistence in plural societies. He argues that if intergroup
complementarities are nonreplicable and there exist nonviolent mechanisms for distributing the gains from trade, ethnic complementarities can
encourage peaceful coexistence by enhancing the gains from interethnic
cooperation and, hence, the costs of violence. These predictions are borne out
in a dataset of Indian riots at the town-level between 1850 and 1950, which
indicates that Hindu–Muslim violence was five times less severe in Indian
localities where Hindu and Muslim groups had in early eras performed
complementary economic functions. Building on Jha (2013), Jeon (2014b)
uses a game-theoretic model of decentralized intergroup cooperation to
show that ethnic complementarities create strong incentives for groups to
construct effective cooperative institutions to support interethnic exchange
and realize the gains from complementarity. These studies suggest that one
strategy for minimizing the costs and maximizing the benefits of diversity
is to encourage ethnic specialization and trade. A positive externality of this
approach may be increased economic efficiency following the principle of
comparative advantage, although as we pointed out earlier, the evidence for
this remains inconclusive.

Exploring Opportunities in Cultural Diversity

9

MOVING FORWARD
Social science research on cultural diversity has made substantial progress
toward improving our understanding of diversity’s social costs and
economic benefits. However, as with most good research programs, by
highlighting new patterns in human behavior, this research has generated
many new questions. Moving forward, we believe there are four unresolved
issues that should and will be the focus of future research.
First, future research will clarify the conditions under which one of the
two opposing forces of diversity dominates. Existing research suggests a linear increase in benefits as societies move from ethnic polarization to fractionalization (Ager & Bruckner, 2011). This finding is partially at odds with
alternative theories of diversity that predict an inverse-U-shaped relationship between fractionalization and performance (e.g., Ashraf & Galor, 2013;
Lazear, 1999). Future work will require an iterative process of theory building
and empirical testing to shed light on the social, political, economic, and institutional characteristics that distinguish cases in which diversity leads to productivity gains from the cases in which diversity leads to underperformance.
Second, future research will need to fill the conceptual gap in our understanding of the relationship between the types of functional diversities (e.g.,
skill and cognitive diversity) that are hypothesized to enhance group performance at knowledge-intensive activities, and the types of social diversities
(e.g., ethnic, linguistic, birthplace) that become the basis for identity, and,
often, fractionalization. Although there are good reasons to believe there is
a correlation between functional and social diversity—such that individuals from a variety of different ethnic, cultural, and religious backgrounds
would be more likely to exhibit the types of functional diversities important
for group performance (Alesina, Harnoss, & Rapoport, 2013; Hong & Page,
2001; Page, 2007; Thomas & Ely, 1996)—rigorous empirical analyses for how
these functional differences develop in the first place, or which dimensions
of diversity are most beneficial, are lacking.
Third, there is a need to look beyond economic outcomes to properly
assess the full benefits of cultural diversity. In theory, gains from diversity in
the form of improved problem-solving, innovation-generation, prediction,
and decision-making capabilities can shape a range of outcomes of interest.
Diverse governments, for example, may be better than homogenous governments at designing effective public policies, dealing with political crises,
and stimulating the economy. Heterogeneous communities may be more
robust and superior at finding innovative solutions to local problems, such
as insecurity and the risk of natural disasters. If gains from diversity are
acknowledged across social divisions, it may also generate incentives for
societies to create stronger cooperative institutions in both the public and

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

private spheres to support valuable intergroup exchange, for instance, in the
form of legal protections for minorities and resources to acquire the tools for
success in the host society. These are speculations, but they are not inconsistent with the implications of existing theory (Page, 2007/2011). Further
investigation may reveal that the gains from diversity are far reaching.
Fourth, and perhaps most importantly, research will need to exploit the
power of experimental methods to identify viable strategies for reducing
discriminatory behavior and realizing the gains from diversity. Social psychologists have long employed laboratory experiments to reveal the mechanisms driving racial prejudice and identify promising prejudice-reduction
strategies (see Paluck & Green, 2009 for a review). However, the next step
for the literature is to move out of the laboratory and into the field, where
interventions can be tested using real-world outcomes and with groups with
varying degrees of past cooperation and conflict. This research should also
begin to catalog the numerous approaches and interventions that exist and
estimate their cost-effectiveness with the purposes of identifying the most
viable strategies for promoting peace, cooperation, and economic productivity in plural societies. Owing to the empirical difficulties with separating
correlations and disentangling causal effects in observational data, the experimental approach is likely to provide analytical leverage not available from
other research methods.
We believe that the resolution of these issues will have practical importance
in our world of economic and cultural integration, where groups, neighborhoods, villages, cities, and countries are becoming increasingly more diverse.
Owing to the high costs of reversing the technological advances that permit cultural mixing, and the unacceptable costs of eliminating diversity from
within our borders, there is a necessity for developing effective strategies for
managing multicultural societies. Ideally, these strategies will not only be
effective in reducing the social costs of cultural diversity but also in helping societies take advantage of the potential benefits of increasing cultural
diversity within their borders.
REFERENCES
Adida, C. L., Laitin, D. D., & Valfort, M. (2010). Identifying barriers to Muslim
integration in France. Proceedings of the National Academy of Science, 107, 384–390.
doi:10.1073/pnas.1015550107
Ager, P., & Bruckner, M. (2011). Cultural diversity and economic growth: Evidence from
the US during the Age of Mass Migration. Manuscript in preparation. Retrieved from
http://econpapers.repec.org/paper/adlwpaper/2011-02.htm.
Alesina, A., Baqir, R., & Easterly, W. (1999). Public goods and ethnic divisions. Quarterly Journal of Economics, 114, 1243–1284. doi:10.1162/003355399556269

Exploring Opportunities in Cultural Diversity

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Alesina, A., Devleeschauwer, A., Easterly, W., Kurlat, S., & Wacziarg, R. (2003). Fractionalization. Journal of Economic Growth, 8, 155–194. doi:10.2139/ssrn.319762
Alesina, A., Harnoss, J., & Rapoport, H. (2013). Birthplace diversity and economic prosperity. Manuscript in preparation. Retrieved from http://www.nber.org/papers/
w18699.
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Triandis, H. C., Hall, E. R., & Ewen, R. B. (1965). Member heterogeneity and dyadic
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on organizational behavior (pp. 2077–2140). Greenwich, CT: JAI Press.

FURTHER READING
Alesina, A., & La Ferrara, E. (2005). Ethnic diversity and economic performance (pp.
762–800). XLIII: Journal of Economic Literature. doi:10.1257/002205105774431243
Hong, L., & Page, S. E. (2001). Problem solving by heterogeneous agents. Journal of
Economic Theory, 97, 123–163. doi:10.1006/jeth.2000.2709
Page, S. E. (2007). The difference: How the power of diversity creates better groups, firms,
schools, and societies. Princeton, NJ: Princeton University Press.
Swann, W. B., Polzer, J. T., Seyle, D. C., & Ko, S. J. (2004). Finding value in diversity: Verification of personal and social self-views in diverse groups. Academy of
Management Review, 29, 9–27. doi:10.5465/AMR.2004.11851702
Williams, K. Y., & O’Reilly, C. A. (1998). Demography and diversity in organizations:
A review of 40 years of research. In B. M. Staw & L. L. Cummings (Eds.), Research
on organizational behavior (pp. 2077–2140). Greenwich, CT: JAI Press.

DAVID D. LAITIN SHORT BIOGRAPHY
David D. Laitin is the James T. Watkins IV and Elise V. Watkins Professor of
Political Science at Stanford University. He received his BA from Swarthmore
College and then served as a Peace Corps volunteer in Somalia and Grenada.
He received his PhD in political science from UC Berkeley. As a student of
comparative politics, he has conducted field research in Somalia, Yorubaland
(Nigeria), Catalonia (Spain), Estonia, and France focusing on issues of language and religion, and how these cultural phenomena link nation to state.
His books include Politics, Language, and Thought: The Somali Experience;
Hegemony and Culture: Politics and Religious Change among the Yoruba;
Language Repertoires and State Construction in Africa; Identity in Formation: The Russian-Speaking Populations in the Near Abroad; and Nations,
States and Violence. In collaboration with James Fearon, he has published

Exploring Opportunities in Cultural Diversity

15

papers on ethnicity, ethnic cooperation, the sources of civil war, and on policies that work to settle civil wars. He has collaborated with Alan Krueger and
Eli Berman on international terrorism. Laitin has been a recipient of fellowships from the Howard Foundation, the Rockefeller Foundation, the Guggenheim Foundation, and the Russell Sage Foundation, and has received several
grants from the NSF. He is an elected member of the American Academy of
Arts and Sciences and the National Academy of Sciences.2
SANGICK JEON SHORT BIOGRAPHY
Sangick Jeon is a Co-Founder at Groundtruth.io. His research explores
public policies, interventions, and social innovations that can resolve pressing global problems, like the persistence of poverty and violence. Sangick’s
work has been published in scientific journals, covered by media outlets,
and supported by numerous grants and fellowships, including those from
the National Science Foundation, the Russell Sage Foundation, and the
Stanford Graduate School of Business. He received his Ph.D. from Stanford
University.3
RELATED ESSAYS
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Aberbach
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and Maria Charles
2. Corresponding Author: Department of Political Science, Stanford University, 616 Serra St, Encina Hall
West, Room 100, Stanford, CA 94305. E-mail: dlaitin@stanford.edu.
3. Groundtruth.io, 2582 Great Highway, San Francisco, CA 94116. Email: sunny@groundtruth.io.

16

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Elites (Sociology), Johan S. G. Chu and Mark S. Mizruchi
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Micro-Cultures (Sociology), Gary Alan Fine
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and Cydney H. Dupree
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Gonzales and Benjamin J. Roth
Normal Negative Emotions and Mental Disorders (Sociology), Allan V.
Horwitz
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Davin L. Phoenix
The Development of Social Trust (Psychology), Vikram K. Jaswal and Marissa
B. Drell
Cultural Neuroscience: Connecting Culture, Brain, and Genes (Psychology),
Shinobu Kitayama and Sarah Huff
Reconciliation and Peace-Making: Insights from Studies on Nonhuman
Animals (Anthropology), Sonja E. Koski
Immigration and the Changing Status of Asian Americans (Sociology),
Jennifer Lee
Emotion and Intergroup Relations (Psychology), Diane M. Mackie et al.
Immigrant Sociocultural Adaptation, Identification, and Belonging (Sociology), Sarah J. Mahler
Visualizing Globalization (Sociology), Matthew C. Mahutga and Robert
Nash-Parker
Immigrant Health Paradox (Sociology), Kyriakos S. Markides and Sunshine
Rote
The Future of Marriage (Sociology), Elizabeth Aura McClintock
Participatory Governance (Political Science), Stephanie L. McNulty and Brian
Wampler
Gender and Women’s Influence in Public Settings (Political Science), Tali
Mendelberg et al.

Exploring Opportunities in Cultural Diversity

17

Migration and Globalization (Political Science), Margaret E. Peters
Politics of Immigration Policy (Political Science), Jeannette Money
Why Do Governments Abuse Human Rights? (Political Science), Will H.
Moore and Ryan M. Welch
Cultural Conflict (Sociology), Ian Mullins
Culture as Situated Cognition (Psychology), Daphna Oyserman
Health and Social Inequality (Sociology), Bernice A. Pescosolido
Culture and Movements (Sociology), Francesca Polletta and Beth Gharrity
Gardner
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Andrew Reeves
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Kristen Schilt
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Gender and Work (Sociology), Christine L. Williams and Megan Tobias Neely
Incarceration and Health (Sociology), Christopher Wildeman
Assimilation and its Discontents (Sociology), Min Zhou



Exploring Opportunities in
Cultural Diversity1
DAVID D. LAITIN and SANGICK JEON

Abstract
In economics and political science, there is evidence from large cross-sectional
datasets and field experiments that neighborhoods, villages, cities, and countries
with higher levels of cultural diversity have lower levels of generalized trust, lower
quality of public goods, and poorer economic performance. However, in social
psychology, organizational behavior, and computer science, there is evidence that
diverse populations are collectively better able to solve complex problems with
creative solutions. The next generation of research, crucial for the globalized world
that is undermining homogeneous communities, will utilize experimental research
designs (such as those based on natural or quasi-natural experiments, laboratory
experiments, and randomized experiments in controlled natural settings) to better
understand the mechanisms sustaining underperformance of diverse communities
and to identify interventions that enable community members to take advantage of
the problem-solving promise of diversity to yield social and economic benefits.

INTRODUCTION
Ethnic and cultural diversity imposes a paradox on society. On the one hand,
it is costly. When neighborhoods, villages, cities, and countries are comprised
of individuals with different beliefs and backgrounds, they tend to fractionalize and fight along those differences. At the same time, diversity in beliefs
and backgrounds is often functional, such that the very same heterogeneities
that generate conflict can also produce large gains in economic productivity and improve performance in intellective tasks such as problem solving,
innovation generation, and decision making. As Alberto Alesina and Eliana
La Ferrara point out, “New York and Los Angeles are among the two most
troubled American cities in terms of racial relations … [but] they are constant
producers of innovation in the arts and business” (2005, p. 762).
1. We are grateful to Scott Page and Charles O’Reilly for providing helpful feedback and sharing their
thoughts on the emerging trend described in this essay.
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

1

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

The next generation of social science research—partly motivated by theory
and partly motivated by its practical implications in a world of increasing
economic integration and cultural mixing—will likely clarify several puzzles
about diversity’s trade-offs. If diversity imposes both costs and benefits, what
is the net impact of diversity on the probability of social peace, the production of public goods, and economic growth? What kinds of interventions and
diversity management strategies can help multicultural groups and societies
minimize the costs and realize the benefits of heterogeneity?
Part of the reason these questions are currently difficult to answer is because
we know little about the benefits of diversity. This is even the case concerning diversity of factor endowments and the benefits to international trade
at the country level. Although theoretically demonstrated by David Ricardo
in 1817 (Ricardo 1817/1951) and repeatedly elaborated, refined, and tested,
a recent literature review by Nobelist Paul Samuelson (2001) reveals many
unanswered questions on whether those gains are actually realized in the
real world. No surprise that this is even more so concerning the gains from
within-country diversity. To be sure, theoretical and experimental research
on the productivity-enhancing effects of diversity illustrate that groups composed of more dissimilar people are more creative, better decision makers,
and superior problem solvers (e.g., Hoffman & Maier, 1961; Hong & Page,
2004). But there are very few large-N studies that have convincingly identified such gains from diversity. Results from the experimental literature might
still appear generalizable if they were particularly strong, but results are often
contradictory and fail to replicate across studies (Williams & O’Reilly, 1998).
Perhaps more problematically, the literatures on the costs and benefits of
diversity have developed largely in isolation of each other. Although in social
psychology, organizational behavior, and computer science there is a strong
recognition that diversity is immensely valuable for the prosperity and durability of societies (Page, 2007/2011), in political science and economics diversity is often characterized as exclusively costly, thought to lead to a range
of socially undesirable outcomes such as enhanced likelihood of civil conflict (Horowitz, 1985), the underprovision of public goods (Alesina, Baqir,
& Easterly, 1999), economic underdevelopment (Easterly & Levine, 1997),
social distrust (Putnam, 2007) and democratic instability (Rabushka & Shepsle, 1972). Such disciplinary divides have created narrow theories of diversity
that have not been fully useful for assessing the net value of diversity and
identifying viable strategies for not only minimizing the costs of diversity
but also realizing its benefits.
A new generation of researchers can draw on insights and innovative
research methods from multiple disciplines to reevaluate the case for diversity and develop a research program that has the potential to estimate the

Exploring Opportunities in Cultural Diversity

3

magnitude of diversity’s productivity-enhancing effects, identify the conditions under which they are best realized, and assess interventions designed
to manage both the costs and benefits of diversity. In the subsequent sections
we describe foundational and cutting-edge research on this topic. We also
discuss opportunities for impactful research and conclude with thoughts on
the practical importance of addressing puzzles about diversity’s trade-offs.
FOUNDATIONAL RESEARCH
THE BENEFITS OF DIVERSITY
In social psychology, organizational behavior, computer science, and economics, there is an increasing awareness that cultural diversity can be
beneficial for the well-being of communities and societies. Because cultural
diversity is often correlated with diversity in perspectives, skills, and
cognitive abilities, it is hypothesized that diversity generates large efficiency
gains in productivity and improves performance in intellective tasks such as
problem solving, knowledge creation, prediction generation, and decision
making (see Page, 2007 for a review). Commonly referred to as the “value in
diversity” hypotheses, this line of thought isolates (at least) two mechanisms
by which diversity improves group productivity: (i) by producing a variety
of perspectives and skills useful for problem solving and task completion,
and (ii) by creating the type of task-related conflict that leads to a more
complete consideration of the issues at hand (Hoffman & Maier, 1961;
Nemeth, 1986; O’Reilly, Williams, & Barsade, 1997).
These ideas are founded on early social psychology experiments that generally involved a group of subjects solving problems or completing tasks in the
laboratory under various treatment conditions. Hoffman’s (1959) and Hoffman and Maier’s (1961) experiments revealed that groups whose members
had more dissimilar personalities and backgrounds produced “higher quality solutions” to difficult problems under laboratory conditions. Triandis,
Hall, and Ewen’s (1965) and Kent and McGrath’s (1969) experimental studies demonstrated that group heterogeneity (in attitudes and gender) fosters
creativity. The experimental literature has been active since these pioneering
efforts, introducing new group treatment designs and often moving out of
the laboratory and into the field.
Many experiments identify productivity gains from diversity. Nemeth
(1986) finds that minority viewpoints improve group performance in several
different types of intellective tasks, including problem solving and decision
making. McLeod, Lobel, and Cox (1996) provide evidence that ethnic diversity improves creativity in a brainstorming task. Priem, Harrison, and Muir
(1995) show that cognitive conflicts lead to better group decisions. Watson,

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Kumar, and Michaelsen (1993) conduct a longitudinal study and show that
culturally homogenous groups are more productive than heterogeneous
groups in the short run, but in the long-run the difference converges and
heterogeneous groups perform better in certain types of intellective tasks
(for comprehensive reviews of the experimental literature see Mannix &
Neale, 2005; Milliken & Martins, 1996; Williams & O’Reilly, 1998).
Researchers have attempted to gain additional analytical leverage by formalizing arguments about individual-level heterogeneities and intellective
task performance. Hong and Page (2001/2004) propose a model in which
agents are characterized by a perspective-heuristic pair, where a perspective is
an agent’s internal representation of a problem, and a heuristic is an algorithm
that the agent employs to locate solutions. Together, a perspective-heuristic
pair determines an individual’s problem-solving capabilities, and aggregated at the group level, determines a group’s problem-solving capabilities.
Using this framework, Hong and Page show that if problems are sufficiently
difficult such that no one agent can solve the problem individually, groups
with diverse perspective-heuristic pairs outperform homogeneous groups
at problem solving, even when the latter are comprised of individually
higher ability problem solvers. In other words, diversity trumps ability (see
also Bendor & Page, 2013 for a related formulation). Lazear (1999) develops
a model in which diversity generates productivity gains when workers have
the ability to communicate and possess skills and knowledge sets that are
“relevant” and “disjoint.” In his model, diversity has diminishing marginal
returns and increasing marginal costs, implying an inverted-U-shaped
relationship between diversity and productivity. Alesina and La Ferrara
(2005) model the costs and benefits of diversity at the jurisdiction level and
show, among other things, that diversity increases productivity at higher
per capita output, where skill differentiation is likely to be more useful.
Despite a growing experimental and theoretical literature that suggests
diversity improves group performance, few scholars have empirically
identified such gains in a statistically convincing way at the aggregate level.
Ottaviano and Peri (2006) analyze data on wages and rents in US metropolitan areas between 1970 and 1990 and find that US-born individuals receive
higher wages and pay higher rents in areas with larger shares of foreign
born, suggesting that diversity increases productivity. Peri (2012) shows that
immigration has improved the total factor productivity across US states,
arguably by promoting efficient task specialization. However, the direction
of causality in these studies is ambiguous—is immigration the reason for
economic productivity, or did productivity attract immigrants by creating
economic opportunities? Because ethnic composition is endogenous to
economic performance, the results are difficult to interpret (see Alesina & La
Ferrara, 2005, p. 778, on this point). The management literature also provides

Exploring Opportunities in Cultural Diversity

5

evidence that diversity enhances productivity at the firm level (Hollowell,
2007; Kochan et al., 2003; Richard, McMillan, Chadwick, & Dwyer, 2003),
but these studies rely on observational data without controlling for omitted
factors that might affect both diversity and productivity. Because diversity
is not randomly assigned, these studies are unable to identify causal effects,
only correlations.
THE COSTS OF DIVERSITY
Although cultural diversity may bring about a mix of skills and perspectives
that is useful for collective task performance, there is evidence that ethnic
and cultural diversity complicates the group process, frequently leading to
emotional dissatisfaction, decreased communication, and interethnic conflict
(Pelled, Eisenhardt, & Xin, 1999; Tajfel, Billig, Bundy, & Flament, 1971; Tsui,
Egan, & O’Reilly, 1992). Diversity is thus a double-edged sword, producing
benefits in the form of greater economic productivity and costs in the form
of reduced social cohesion (Alesina & La Ferrara, 2005). As a result, many
scholars argue that even if diversity can be beneficial, it will be so only when
it is well managed (Page, 2007; Swann, Polzer, Seyle, & Ko, 2004).
There are two prominent explanations for why diversity might reduce
social cohesion and prospects for interethnic cooperation. At the most
basic level, individuals may possess a cognitive tendency to create inand out-group distinctions based on salient, ascriptive differences, attach
positive utility to members of one’s own group, and attach negative or no
utility to members of an out-group (Tajfel et al., 1971). According to this
psychological theory, ethnic tensions are the result of a taste for racial discrimination and in-group favoritism. A second channel by which diversity
may affect prospects for cooperation is by making it difficult to implement effective social sanctions and thereby deter opportunistic behavior.
Because coethnics generally share a common language and culture and
enjoy relatively dense social networks, they may simply be better equipped
to monitor socially harmful behavior and enforce cooperation (Fearon &
Laitin, 1996; Habyarimana, Humphreys, Posner, & Weinstein, 2007). Under
this rational choice framework, ethnic tensions are not the result of inherent
animosities but rational incentives for individuals to interact preferentially
with in-group members.
In political science and economics, the potential costs of diversity are well
known, and include increased likelihood of civil conflict (Esteban, Mayoral,
& Ray, 2012; Horowitz, 1985; Montalvo & Reynal-Querol, 2005), labor market discrimination (Adida, Laitin, & Valfort, 2010; Becker, 1957; Bertrand &
Mullainathan, 2004), lower levels of generalized trust (Alesina & La Ferrara,
2002; Glaeser, Laibson, Scheinkman, & Soutter 2000), the underprovision of

6

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

public goods provision (Alesina, Baqir, & Easterly, 1999; Miguel & Gugerty,
2005), low economic growth (Alesina, Devleeschauwer, Easterly, Kurlat, &
Wacziarg, 2003; Easterly & Levine, 1997), and democratic instability (Dahl,
1971; Rabushka & Shepsle, 1972), among others. Importantly, however, the
quality of evidence differs across topics. Some of this research—such as
those studying the impact of diversity on civil conflict, economic growth,
and democratic instability—rely heavily on cross-country comparisons. But
because ethnic diversity across countries is correlated with a number of
nontrivial characteristics—such as per capita income and latitude—such
studies have not fully disentangled the effects of diversity. Moreover, there
is a debate as to whether plural societies are especially prone to higher
levels of ethnic conflict and lower levels of democratic performance. Lijphart
(1977) shows that under certain institutional frameworks, heterogeneity
is not a threat to democracy. Fearon and Laitin (1996) show that instances
of interethnic cooperation outnumber instances of interethnic violence
2000 to 1 in Africa and the post-Soviet world in the first generation after
independence—regions thought to be particularly prone to ethnic violence.
Fearon and Laitin (2003) show that in cross-country regressions, the correlation between ethnic fractionalization and civil war disappears after
controlling for per capita income. Nonetheless, the prevailing belief is that
diversity poses serious challenges to the well-being of societies. Banerjee,
Iyer, and Somanathan, for example, write:
“One of the most powerful hypotheses in political economy is the notion that
social divisions undermine economic progress, not just in extremis, as in the
case of civil war, but also in more normal times”
(2005, p. 639)

CUTTING-EDGE RESEARCH
Several working papers and recent publications make contributions to the
study of diversity’s opposing effects. They represent advances because they
either analyze the interplay between diversity’s costs and benefits, thus permitting a proper assessment of diversity’s net gains, or produce statistically
convincing estimates of diversity’s costs and benefits using research designs
capable of identifying causal effects. Some of this work also makes progress
toward revealing the specific dimensions of cultural diversity (e.g., ethnic,
linguistic, religious, or birthplace) that create gains in productivity and intellective task performance.
A working paper by Alesina, Harnoss, and Rapoport (2013), for example,
shows that—unlike measures of ethnolinguistic fractionalization—birthplace

Exploring Opportunities in Cultural Diversity

7

diversity has strong positive effects on economic development across countries. The authors argue that people with different countries of births are
more likely to exhibit the type of cognitive and functional differences useful
for intellective task performance than people of different skin color and languages, as people born in different countries have generally been exposed
to different education systems, cultural values, and life experiences. To
address endogeneity, Alesina et al. take an instrumental variables approach
that involves specifying a gravity model of migration to predict birthplace
diversity based on a set of exogenous bilateral geographic and cultural
variables. Ortega and Peri (2012) rely on a similar identification strategy
to estimate the productivity gains from immigration in a sample of 147
countries. They also find productivity gains from immigration, reporting
that a 10 percentage-point increase in the share of foreign born is associated
with 130–170% increase in per capita income. Their results also suggest
that immigration has been more beneficial for economic performance than
openness to trade, and that there are two avenues by which immigration
might improve economic performance: by increasing total factor productivity and stimulating innovation. Ager and Bruckner (2011) explore the
impact of immigration in the United States during the period of mass
migration (1870–1920) and show that counties that became more culturally
fractionalized (i.e., with many new groups) experienced gains in output
per capita, whereas counties that became more polarized (i.e., with two
contending groups) experienced reductions in output. Here, we see variation in the demographics of diversity have different implications for social
outcomes.
Ashraf and Galor (2013) model both the social costs and the economic benefits of diversity in a single model, with diminishing marginal returns to both
diversity and homogeneity. The model thus predicts an inverted-U-shaped
relationship between diversity and economic performance. Consistent with
this prediction, the authors show that comparative economic development in
the precolonial and modern eras is a nonmonotonic function of genetic diversity. According to this line of thought, the high degree of diversity among
African populations and the low degree of diversity among Native American
populations has been detrimental for economic development, while the intermediate level of diversity in European and Asian populations has been beneficial. To address endogeneity, Ashraf and Galor use an instrument based
on the well-established “out of Africa” theory, which posits that the human
species originated in East Africa 150,000 years ago and thereafter proceeded
to inhabit the entire globe in a stepwise migration process, with subgroups
leaving their initial settlements to create new settlements further away, taking
with them only a subset of the overall genetic diversity found in their original
settlements. Prehistoric migratory distance from East Africa thus has a strong

8

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

negative effect on genetic diversity. And because migratory distance from
East Africa should have no direct effect on economic development, Ashraf
and Galor are able to employ an exogenous measure of diversity to identify
its causal effects on productivity.
Experimental work by Jeon (2014a) also identifies a humped-shaped effect
of diversity. Using a controlled problem-solving competition in Nairobi,
Kenya, with random assignment of subjects into ethnically homogeneous
and heterogeneous groups, he assesses two classes of strategies for managing
diversity: (i) assimilationist strategies, which encourage the construction of
superordinate social identities (e.g., based on a team, religion, or nation) and
(ii) multiculturalist strategies, which entail the construction of shared intergroup beliefs that acknowledge the value of each group’s culture. Results
are mixed. The multicultural prime improves intellective task performance
in ethnically divided groups, but only the assimilation prime improves
prospects for interethnic cooperation. Hoogendoorn and van Praag (2012)
also consider the nonmonotonic effects of diversity using a field experiment
with 550 business students who were asked to create real companies as
part of their curriculum. The authors experimentally manipulate ethnic
composition of student teams and find that a threshold level of diversity
is needed before any gains from heterogeneity are detectable in sales and
profits.
Jha (2007, 2013) considers the effect of economic complementarities across
ethnic groups, or, ethnic complementarities, on prospects for ethnic tolerance
and peaceful coexistence in plural societies. He argues that if intergroup
complementarities are nonreplicable and there exist nonviolent mechanisms for distributing the gains from trade, ethnic complementarities can
encourage peaceful coexistence by enhancing the gains from interethnic
cooperation and, hence, the costs of violence. These predictions are borne out
in a dataset of Indian riots at the town-level between 1850 and 1950, which
indicates that Hindu–Muslim violence was five times less severe in Indian
localities where Hindu and Muslim groups had in early eras performed
complementary economic functions. Building on Jha (2013), Jeon (2014b)
uses a game-theoretic model of decentralized intergroup cooperation to
show that ethnic complementarities create strong incentives for groups to
construct effective cooperative institutions to support interethnic exchange
and realize the gains from complementarity. These studies suggest that one
strategy for minimizing the costs and maximizing the benefits of diversity
is to encourage ethnic specialization and trade. A positive externality of this
approach may be increased economic efficiency following the principle of
comparative advantage, although as we pointed out earlier, the evidence for
this remains inconclusive.

Exploring Opportunities in Cultural Diversity

9

MOVING FORWARD
Social science research on cultural diversity has made substantial progress
toward improving our understanding of diversity’s social costs and
economic benefits. However, as with most good research programs, by
highlighting new patterns in human behavior, this research has generated
many new questions. Moving forward, we believe there are four unresolved
issues that should and will be the focus of future research.
First, future research will clarify the conditions under which one of the
two opposing forces of diversity dominates. Existing research suggests a linear increase in benefits as societies move from ethnic polarization to fractionalization (Ager & Bruckner, 2011). This finding is partially at odds with
alternative theories of diversity that predict an inverse-U-shaped relationship between fractionalization and performance (e.g., Ashraf & Galor, 2013;
Lazear, 1999). Future work will require an iterative process of theory building
and empirical testing to shed light on the social, political, economic, and institutional characteristics that distinguish cases in which diversity leads to productivity gains from the cases in which diversity leads to underperformance.
Second, future research will need to fill the conceptual gap in our understanding of the relationship between the types of functional diversities (e.g.,
skill and cognitive diversity) that are hypothesized to enhance group performance at knowledge-intensive activities, and the types of social diversities
(e.g., ethnic, linguistic, birthplace) that become the basis for identity, and,
often, fractionalization. Although there are good reasons to believe there is
a correlation between functional and social diversity—such that individuals from a variety of different ethnic, cultural, and religious backgrounds
would be more likely to exhibit the types of functional diversities important
for group performance (Alesina, Harnoss, & Rapoport, 2013; Hong & Page,
2001; Page, 2007; Thomas & Ely, 1996)—rigorous empirical analyses for how
these functional differences develop in the first place, or which dimensions
of diversity are most beneficial, are lacking.
Third, there is a need to look beyond economic outcomes to properly
assess the full benefits of cultural diversity. In theory, gains from diversity in
the form of improved problem-solving, innovation-generation, prediction,
and decision-making capabilities can shape a range of outcomes of interest.
Diverse governments, for example, may be better than homogenous governments at designing effective public policies, dealing with political crises,
and stimulating the economy. Heterogeneous communities may be more
robust and superior at finding innovative solutions to local problems, such
as insecurity and the risk of natural disasters. If gains from diversity are
acknowledged across social divisions, it may also generate incentives for
societies to create stronger cooperative institutions in both the public and

10

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

private spheres to support valuable intergroup exchange, for instance, in the
form of legal protections for minorities and resources to acquire the tools for
success in the host society. These are speculations, but they are not inconsistent with the implications of existing theory (Page, 2007/2011). Further
investigation may reveal that the gains from diversity are far reaching.
Fourth, and perhaps most importantly, research will need to exploit the
power of experimental methods to identify viable strategies for reducing
discriminatory behavior and realizing the gains from diversity. Social psychologists have long employed laboratory experiments to reveal the mechanisms driving racial prejudice and identify promising prejudice-reduction
strategies (see Paluck & Green, 2009 for a review). However, the next step
for the literature is to move out of the laboratory and into the field, where
interventions can be tested using real-world outcomes and with groups with
varying degrees of past cooperation and conflict. This research should also
begin to catalog the numerous approaches and interventions that exist and
estimate their cost-effectiveness with the purposes of identifying the most
viable strategies for promoting peace, cooperation, and economic productivity in plural societies. Owing to the empirical difficulties with separating
correlations and disentangling causal effects in observational data, the experimental approach is likely to provide analytical leverage not available from
other research methods.
We believe that the resolution of these issues will have practical importance
in our world of economic and cultural integration, where groups, neighborhoods, villages, cities, and countries are becoming increasingly more diverse.
Owing to the high costs of reversing the technological advances that permit cultural mixing, and the unacceptable costs of eliminating diversity from
within our borders, there is a necessity for developing effective strategies for
managing multicultural societies. Ideally, these strategies will not only be
effective in reducing the social costs of cultural diversity but also in helping societies take advantage of the potential benefits of increasing cultural
diversity within their borders.
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FURTHER READING
Alesina, A., & La Ferrara, E. (2005). Ethnic diversity and economic performance (pp.
762–800). XLIII: Journal of Economic Literature. doi:10.1257/002205105774431243
Hong, L., & Page, S. E. (2001). Problem solving by heterogeneous agents. Journal of
Economic Theory, 97, 123–163. doi:10.1006/jeth.2000.2709
Page, S. E. (2007). The difference: How the power of diversity creates better groups, firms,
schools, and societies. Princeton, NJ: Princeton University Press.
Swann, W. B., Polzer, J. T., Seyle, D. C., & Ko, S. J. (2004). Finding value in diversity: Verification of personal and social self-views in diverse groups. Academy of
Management Review, 29, 9–27. doi:10.5465/AMR.2004.11851702
Williams, K. Y., & O’Reilly, C. A. (1998). Demography and diversity in organizations:
A review of 40 years of research. In B. M. Staw & L. L. Cummings (Eds.), Research
on organizational behavior (pp. 2077–2140). Greenwich, CT: JAI Press.

DAVID D. LAITIN SHORT BIOGRAPHY
David D. Laitin is the James T. Watkins IV and Elise V. Watkins Professor of
Political Science at Stanford University. He received his BA from Swarthmore
College and then served as a Peace Corps volunteer in Somalia and Grenada.
He received his PhD in political science from UC Berkeley. As a student of
comparative politics, he has conducted field research in Somalia, Yorubaland
(Nigeria), Catalonia (Spain), Estonia, and France focusing on issues of language and religion, and how these cultural phenomena link nation to state.
His books include Politics, Language, and Thought: The Somali Experience;
Hegemony and Culture: Politics and Religious Change among the Yoruba;
Language Repertoires and State Construction in Africa; Identity in Formation: The Russian-Speaking Populations in the Near Abroad; and Nations,
States and Violence. In collaboration with James Fearon, he has published

Exploring Opportunities in Cultural Diversity

15

papers on ethnicity, ethnic cooperation, the sources of civil war, and on policies that work to settle civil wars. He has collaborated with Alan Krueger and
Eli Berman on international terrorism. Laitin has been a recipient of fellowships from the Howard Foundation, the Rockefeller Foundation, the Guggenheim Foundation, and the Russell Sage Foundation, and has received several
grants from the NSF. He is an elected member of the American Academy of
Arts and Sciences and the National Academy of Sciences.2
SANGICK JEON SHORT BIOGRAPHY
Sangick Jeon is a Co-Founder at Groundtruth.io. His research explores
public policies, interventions, and social innovations that can resolve pressing global problems, like the persistence of poverty and violence. Sangick’s
work has been published in scientific journals, covered by media outlets,
and supported by numerous grants and fellowships, including those from
the National Science Foundation, the Russell Sage Foundation, and the
Stanford Graduate School of Business. He received his Ph.D. from Stanford
University.3
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Rent, Rent-Seeking, and Social Inequality (Sociology), Beth Red Bird and
David B. Grusky
Neighborhoods and Cognitive Development (Psychology), Jondou Chen and
Jeanne Brooks-Gunn
A Social Psychological Approach to Racializing Wealth Inequality (Sociology), Joey Brown
Stereotype Content (Sociology), Beatrice H. Capestany and Lasana T. Harris
Political Ideologies (Political Science), Edward G. Carmines and Nicholas J.
D’Amico
Culture and Cognition (Sociology), Karen A. Cerulo
Gender Segregation in Higher Education (Sociology), Alexandra Hendley
and Maria Charles
2. Corresponding Author: Department of Political Science, Stanford University, 616 Serra St, Encina Hall
West, Room 100, Stanford, CA 94305. E-mail: dlaitin@stanford.edu.
3. Groundtruth.io, 2582 Great Highway, San Francisco, CA 94116. Email: sunny@groundtruth.io.

16

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Elites (Sociology), Johan S. G. Chu and Mark S. Mizruchi
Misinformation and How to Correct It (Psychology), John Cook et al.
Cultural Differences in Emotions (Psychology), Jozefien De Leersnyder et al.
Resilience (Psychology), Erica D. Diminich and George A. Bonanno
Diversity in Groups (Sociology), Catarina R. Fernandes and Jeffrey T. Polzer
Micro-Cultures (Sociology), Gary Alan Fine
Cognitive Processes Involved in Stereotyping (Psychology), Susan T. Fiske
and Cydney H. Dupree
Empathy Gaps between Helpers and Help-Seekers: Implications for Cooperation (Psychology), Vanessa K. Bohns and Francis J. Flynn
Controlling the Influence of Stereotypes on One’s Thoughts (Psychology),
Patrick S. Forscher and Patricia G. Devine
Culture and Social Networks (Sociology), Jan A. Fuhse
Migrant Networks (Sociology), Filiz Garip and Asad L. Asad
Changing Family Patterns (Sociology), Kathleen Gerson and Stacy Torres
Ethnic Enclaves (Sociology), Steven J. Gold
Immigrant Children and the Transition to Adulthood (Sociology), Roberto G.
Gonzales and Benjamin J. Roth
Normal Negative Emotions and Mental Disorders (Sociology), Allan V.
Horwitz
Racial Disenfranchisement (Political Science), Vincent L. Hutchings and
Davin L. Phoenix
The Development of Social Trust (Psychology), Vikram K. Jaswal and Marissa
B. Drell
Cultural Neuroscience: Connecting Culture, Brain, and Genes (Psychology),
Shinobu Kitayama and Sarah Huff
Reconciliation and Peace-Making: Insights from Studies on Nonhuman
Animals (Anthropology), Sonja E. Koski
Immigration and the Changing Status of Asian Americans (Sociology),
Jennifer Lee
Emotion and Intergroup Relations (Psychology), Diane M. Mackie et al.
Immigrant Sociocultural Adaptation, Identification, and Belonging (Sociology), Sarah J. Mahler
Visualizing Globalization (Sociology), Matthew C. Mahutga and Robert
Nash-Parker
Immigrant Health Paradox (Sociology), Kyriakos S. Markides and Sunshine
Rote
The Future of Marriage (Sociology), Elizabeth Aura McClintock
Participatory Governance (Political Science), Stephanie L. McNulty and Brian
Wampler
Gender and Women’s Influence in Public Settings (Political Science), Tali
Mendelberg et al.

Exploring Opportunities in Cultural Diversity

17

Migration and Globalization (Political Science), Margaret E. Peters
Politics of Immigration Policy (Political Science), Jeannette Money
Why Do Governments Abuse Human Rights? (Political Science), Will H.
Moore and Ryan M. Welch
Cultural Conflict (Sociology), Ian Mullins
Culture as Situated Cognition (Psychology), Daphna Oyserman
Health and Social Inequality (Sociology), Bernice A. Pescosolido
Culture and Movements (Sociology), Francesca Polletta and Beth Gharrity
Gardner
The Politics of Disaster Relief (Political Science), Alexander J. Oliver and
Andrew Reeves
Latinos and the Color Line (Sociology), Clara E. Rodríguez et al.
Curriculum as a Site of Political and Cultural Conflict (Sociology), Fabio
Rojas
Class, Cognition, and Face-to-Face Interaction (Sociology), Lauren A. Rivera
Born This Way: Thinking Sociologically about Essentialism (Sociology),
Kristen Schilt
Stereotype Threat (Psychology), Toni Schmader and William M. Hall
Bringing the Study of Street Gangs Back into the Mainstream (Sociology),
James F. Short, Jr. and Lorine A. Hughes
Atheism, Agnosticism, and Irreligion (Sociology), Buster G. Smith and Joseph
O. Baker
Impact of Limited Education on Employment Prospects in Advanced
Economies (Sociology), Heike Solga
The Future of Class Analyses in American Politics (Political Science), Jeffrey
M. Stonecash
Race in Latin America (Sociology), Edward Telles
Human Residence Patterns (Anthropology), Robert S. Walker
Culture and Globalization (Sociology), Frederick F. Wherry
Gender and Work (Sociology), Christine L. Williams and Megan Tobias Neely
Incarceration and Health (Sociology), Christopher Wildeman
Assimilation and its Discontents (Sociology), Min Zhou


Exploring Opportunities in
Cultural Diversity1
DAVID D. LAITIN and SANGICK JEON

Abstract
In economics and political science, there is evidence from large cross-sectional
datasets and field experiments that neighborhoods, villages, cities, and countries
with higher levels of cultural diversity have lower levels of generalized trust, lower
quality of public goods, and poorer economic performance. However, in social
psychology, organizational behavior, and computer science, there is evidence that
diverse populations are collectively better able to solve complex problems with
creative solutions. The next generation of research, crucial for the globalized world
that is undermining homogeneous communities, will utilize experimental research
designs (such as those based on natural or quasi-natural experiments, laboratory
experiments, and randomized experiments in controlled natural settings) to better
understand the mechanisms sustaining underperformance of diverse communities
and to identify interventions that enable community members to take advantage of
the problem-solving promise of diversity to yield social and economic benefits.

INTRODUCTION
Ethnic and cultural diversity imposes a paradox on society. On the one hand,
it is costly. When neighborhoods, villages, cities, and countries are comprised
of individuals with different beliefs and backgrounds, they tend to fractionalize and fight along those differences. At the same time, diversity in beliefs
and backgrounds is often functional, such that the very same heterogeneities
that generate conflict can also produce large gains in economic productivity and improve performance in intellective tasks such as problem solving,
innovation generation, and decision making. As Alberto Alesina and Eliana
La Ferrara point out, “New York and Los Angeles are among the two most
troubled American cities in terms of racial relations … [but] they are constant
producers of innovation in the arts and business” (2005, p. 762).
1. We are grateful to Scott Page and Charles O’Reilly for providing helpful feedback and sharing their
thoughts on the emerging trend described in this essay.
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

1

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

The next generation of social science research—partly motivated by theory
and partly motivated by its practical implications in a world of increasing
economic integration and cultural mixing—will likely clarify several puzzles
about diversity’s trade-offs. If diversity imposes both costs and benefits, what
is the net impact of diversity on the probability of social peace, the production of public goods, and economic growth? What kinds of interventions and
diversity management strategies can help multicultural groups and societies
minimize the costs and realize the benefits of heterogeneity?
Part of the reason these questions are currently difficult to answer is because
we know little about the benefits of diversity. This is even the case concerning diversity of factor endowments and the benefits to international trade
at the country level. Although theoretically demonstrated by David Ricardo
in 1817 (Ricardo 1817/1951) and repeatedly elaborated, refined, and tested,
a recent literature review by Nobelist Paul Samuelson (2001) reveals many
unanswered questions on whether those gains are actually realized in the
real world. No surprise that this is even more so concerning the gains from
within-country diversity. To be sure, theoretical and experimental research
on the productivity-enhancing effects of diversity illustrate that groups composed of more dissimilar people are more creative, better decision makers,
and superior problem solvers (e.g., Hoffman & Maier, 1961; Hong & Page,
2004). But there are very few large-N studies that have convincingly identified such gains from diversity. Results from the experimental literature might
still appear generalizable if they were particularly strong, but results are often
contradictory and fail to replicate across studies (Williams & O’Reilly, 1998).
Perhaps more problematically, the literatures on the costs and benefits of
diversity have developed largely in isolation of each other. Although in social
psychology, organizational behavior, and computer science there is a strong
recognition that diversity is immensely valuable for the prosperity and durability of societies (Page, 2007/2011), in political science and economics diversity is often characterized as exclusively costly, thought to lead to a range
of socially undesirable outcomes such as enhanced likelihood of civil conflict (Horowitz, 1985), the underprovision of public goods (Alesina, Baqir,
& Easterly, 1999), economic underdevelopment (Easterly & Levine, 1997),
social distrust (Putnam, 2007) and democratic instability (Rabushka & Shepsle, 1972). Such disciplinary divides have created narrow theories of diversity
that have not been fully useful for assessing the net value of diversity and
identifying viable strategies for not only minimizing the costs of diversity
but also realizing its benefits.
A new generation of researchers can draw on insights and innovative
research methods from multiple disciplines to reevaluate the case for diversity and develop a research program that has the potential to estimate the

Exploring Opportunities in Cultural Diversity

3

magnitude of diversity’s productivity-enhancing effects, identify the conditions under which they are best realized, and assess interventions designed
to manage both the costs and benefits of diversity. In the subsequent sections
we describe foundational and cutting-edge research on this topic. We also
discuss opportunities for impactful research and conclude with thoughts on
the practical importance of addressing puzzles about diversity’s trade-offs.
FOUNDATIONAL RESEARCH
THE BENEFITS OF DIVERSITY
In social psychology, organizational behavior, computer science, and economics, there is an increasing awareness that cultural diversity can be
beneficial for the well-being of communities and societies. Because cultural
diversity is often correlated with diversity in perspectives, skills, and
cognitive abilities, it is hypothesized that diversity generates large efficiency
gains in productivity and improves performance in intellective tasks such as
problem solving, knowledge creation, prediction generation, and decision
making (see Page, 2007 for a review). Commonly referred to as the “value in
diversity” hypotheses, this line of thought isolates (at least) two mechanisms
by which diversity improves group productivity: (i) by producing a variety
of perspectives and skills useful for problem solving and task completion,
and (ii) by creating the type of task-related conflict that leads to a more
complete consideration of the issues at hand (Hoffman & Maier, 1961;
Nemeth, 1986; O’Reilly, Williams, & Barsade, 1997).
These ideas are founded on early social psychology experiments that generally involved a group of subjects solving problems or completing tasks in the
laboratory under various treatment conditions. Hoffman’s (1959) and Hoffman and Maier’s (1961) experiments revealed that groups whose members
had more dissimilar personalities and backgrounds produced “higher quality solutions” to difficult problems under laboratory conditions. Triandis,
Hall, and Ewen’s (1965) and Kent and McGrath’s (1969) experimental studies demonstrated that group heterogeneity (in attitudes and gender) fosters
creativity. The experimental literature has been active since these pioneering
efforts, introducing new group treatment designs and often moving out of
the laboratory and into the field.
Many experiments identify productivity gains from diversity. Nemeth
(1986) finds that minority viewpoints improve group performance in several
different types of intellective tasks, including problem solving and decision
making. McLeod, Lobel, and Cox (1996) provide evidence that ethnic diversity improves creativity in a brainstorming task. Priem, Harrison, and Muir
(1995) show that cognitive conflicts lead to better group decisions. Watson,

4

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Kumar, and Michaelsen (1993) conduct a longitudinal study and show that
culturally homogenous groups are more productive than heterogeneous
groups in the short run, but in the long-run the difference converges and
heterogeneous groups perform better in certain types of intellective tasks
(for comprehensive reviews of the experimental literature see Mannix &
Neale, 2005; Milliken & Martins, 1996; Williams & O’Reilly, 1998).
Researchers have attempted to gain additional analytical leverage by formalizing arguments about individual-level heterogeneities and intellective
task performance. Hong and Page (2001/2004) propose a model in which
agents are characterized by a perspective-heuristic pair, where a perspective is
an agent’s internal representation of a problem, and a heuristic is an algorithm
that the agent employs to locate solutions. Together, a perspective-heuristic
pair determines an individual’s problem-solving capabilities, and aggregated at the group level, determines a group’s problem-solving capabilities.
Using this framework, Hong and Page show that if problems are sufficiently
difficult such that no one agent can solve the problem individually, groups
with diverse perspective-heuristic pairs outperform homogeneous groups
at problem solving, even when the latter are comprised of individually
higher ability problem solvers. In other words, diversity trumps ability (see
also Bendor & Page, 2013 for a related formulation). Lazear (1999) develops
a model in which diversity generates productivity gains when workers have
the ability to communicate and possess skills and knowledge sets that are
“relevant” and “disjoint.” In his model, diversity has diminishing marginal
returns and increasing marginal costs, implying an inverted-U-shaped
relationship between diversity and productivity. Alesina and La Ferrara
(2005) model the costs and benefits of diversity at the jurisdiction level and
show, among other things, that diversity increases productivity at higher
per capita output, where skill differentiation is likely to be more useful.
Despite a growing experimental and theoretical literature that suggests
diversity improves group performance, few scholars have empirically
identified such gains in a statistically convincing way at the aggregate level.
Ottaviano and Peri (2006) analyze data on wages and rents in US metropolitan areas between 1970 and 1990 and find that US-born individuals receive
higher wages and pay higher rents in areas with larger shares of foreign
born, suggesting that diversity increases productivity. Peri (2012) shows that
immigration has improved the total factor productivity across US states,
arguably by promoting efficient task specialization. However, the direction
of causality in these studies is ambiguous—is immigration the reason for
economic productivity, or did productivity attract immigrants by creating
economic opportunities? Because ethnic composition is endogenous to
economic performance, the results are difficult to interpret (see Alesina & La
Ferrara, 2005, p. 778, on this point). The management literature also provides

Exploring Opportunities in Cultural Diversity

5

evidence that diversity enhances productivity at the firm level (Hollowell,
2007; Kochan et al., 2003; Richard, McMillan, Chadwick, & Dwyer, 2003),
but these studies rely on observational data without controlling for omitted
factors that might affect both diversity and productivity. Because diversity
is not randomly assigned, these studies are unable to identify causal effects,
only correlations.
THE COSTS OF DIVERSITY
Although cultural diversity may bring about a mix of skills and perspectives
that is useful for collective task performance, there is evidence that ethnic
and cultural diversity complicates the group process, frequently leading to
emotional dissatisfaction, decreased communication, and interethnic conflict
(Pelled, Eisenhardt, & Xin, 1999; Tajfel, Billig, Bundy, & Flament, 1971; Tsui,
Egan, & O’Reilly, 1992). Diversity is thus a double-edged sword, producing
benefits in the form of greater economic productivity and costs in the form
of reduced social cohesion (Alesina & La Ferrara, 2005). As a result, many
scholars argue that even if diversity can be beneficial, it will be so only when
it is well managed (Page, 2007; Swann, Polzer, Seyle, & Ko, 2004).
There are two prominent explanations for why diversity might reduce
social cohesion and prospects for interethnic cooperation. At the most
basic level, individuals may possess a cognitive tendency to create inand out-group distinctions based on salient, ascriptive differences, attach
positive utility to members of one’s own group, and attach negative or no
utility to members of an out-group (Tajfel et al., 1971). According to this
psychological theory, ethnic tensions are the result of a taste for racial discrimination and in-group favoritism. A second channel by which diversity
may affect prospects for cooperation is by making it difficult to implement effective social sanctions and thereby deter opportunistic behavior.
Because coethnics generally share a common language and culture and
enjoy relatively dense social networks, they may simply be better equipped
to monitor socially harmful behavior and enforce cooperation (Fearon &
Laitin, 1996; Habyarimana, Humphreys, Posner, & Weinstein, 2007). Under
this rational choice framework, ethnic tensions are not the result of inherent
animosities but rational incentives for individuals to interact preferentially
with in-group members.
In political science and economics, the potential costs of diversity are well
known, and include increased likelihood of civil conflict (Esteban, Mayoral,
& Ray, 2012; Horowitz, 1985; Montalvo & Reynal-Querol, 2005), labor market discrimination (Adida, Laitin, & Valfort, 2010; Becker, 1957; Bertrand &
Mullainathan, 2004), lower levels of generalized trust (Alesina & La Ferrara,
2002; Glaeser, Laibson, Scheinkman, & Soutter 2000), the underprovision of

6

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

public goods provision (Alesina, Baqir, & Easterly, 1999; Miguel & Gugerty,
2005), low economic growth (Alesina, Devleeschauwer, Easterly, Kurlat, &
Wacziarg, 2003; Easterly & Levine, 1997), and democratic instability (Dahl,
1971; Rabushka & Shepsle, 1972), among others. Importantly, however, the
quality of evidence differs across topics. Some of this research—such as
those studying the impact of diversity on civil conflict, economic growth,
and democratic instability—rely heavily on cross-country comparisons. But
because ethnic diversity across countries is correlated with a number of
nontrivial characteristics—such as per capita income and latitude—such
studies have not fully disentangled the effects of diversity. Moreover, there
is a debate as to whether plural societies are especially prone to higher
levels of ethnic conflict and lower levels of democratic performance. Lijphart
(1977) shows that under certain institutional frameworks, heterogeneity
is not a threat to democracy. Fearon and Laitin (1996) show that instances
of interethnic cooperation outnumber instances of interethnic violence
2000 to 1 in Africa and the post-Soviet world in the first generation after
independence—regions thought to be particularly prone to ethnic violence.
Fearon and Laitin (2003) show that in cross-country regressions, the correlation between ethnic fractionalization and civil war disappears after
controlling for per capita income. Nonetheless, the prevailing belief is that
diversity poses serious challenges to the well-being of societies. Banerjee,
Iyer, and Somanathan, for example, write:
“One of the most powerful hypotheses in political economy is the notion that
social divisions undermine economic progress, not just in extremis, as in the
case of civil war, but also in more normal times”
(2005, p. 639)

CUTTING-EDGE RESEARCH
Several working papers and recent publications make contributions to the
study of diversity’s opposing effects. They represent advances because they
either analyze the interplay between diversity’s costs and benefits, thus permitting a proper assessment of diversity’s net gains, or produce statistically
convincing estimates of diversity’s costs and benefits using research designs
capable of identifying causal effects. Some of this work also makes progress
toward revealing the specific dimensions of cultural diversity (e.g., ethnic,
linguistic, religious, or birthplace) that create gains in productivity and intellective task performance.
A working paper by Alesina, Harnoss, and Rapoport (2013), for example,
shows that—unlike measures of ethnolinguistic fractionalization—birthplace

Exploring Opportunities in Cultural Diversity

7

diversity has strong positive effects on economic development across countries. The authors argue that people with different countries of births are
more likely to exhibit the type of cognitive and functional differences useful
for intellective task performance than people of different skin color and languages, as people born in different countries have generally been exposed
to different education systems, cultural values, and life experiences. To
address endogeneity, Alesina et al. take an instrumental variables approach
that involves specifying a gravity model of migration to predict birthplace
diversity based on a set of exogenous bilateral geographic and cultural
variables. Ortega and Peri (2012) rely on a similar identification strategy
to estimate the productivity gains from immigration in a sample of 147
countries. They also find productivity gains from immigration, reporting
that a 10 percentage-point increase in the share of foreign born is associated
with 130–170% increase in per capita income. Their results also suggest
that immigration has been more beneficial for economic performance than
openness to trade, and that there are two avenues by which immigration
might improve economic performance: by increasing total factor productivity and stimulating innovation. Ager and Bruckner (2011) explore the
impact of immigration in the United States during the period of mass
migration (1870–1920) and show that counties that became more culturally
fractionalized (i.e., with many new groups) experienced gains in output
per capita, whereas counties that became more polarized (i.e., with two
contending groups) experienced reductions in output. Here, we see variation in the demographics of diversity have different implications for social
outcomes.
Ashraf and Galor (2013) model both the social costs and the economic benefits of diversity in a single model, with diminishing marginal returns to both
diversity and homogeneity. The model thus predicts an inverted-U-shaped
relationship between diversity and economic performance. Consistent with
this prediction, the authors show that comparative economic development in
the precolonial and modern eras is a nonmonotonic function of genetic diversity. According to this line of thought, the high degree of diversity among
African populations and the low degree of diversity among Native American
populations has been detrimental for economic development, while the intermediate level of diversity in European and Asian populations has been beneficial. To address endogeneity, Ashraf and Galor use an instrument based
on the well-established “out of Africa” theory, which posits that the human
species originated in East Africa 150,000 years ago and thereafter proceeded
to inhabit the entire globe in a stepwise migration process, with subgroups
leaving their initial settlements to create new settlements further away, taking
with them only a subset of the overall genetic diversity found in their original
settlements. Prehistoric migratory distance from East Africa thus has a strong

8

EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

negative effect on genetic diversity. And because migratory distance from
East Africa should have no direct effect on economic development, Ashraf
and Galor are able to employ an exogenous measure of diversity to identify
its causal effects on productivity.
Experimental work by Jeon (2014a) also identifies a humped-shaped effect
of diversity. Using a controlled problem-solving competition in Nairobi,
Kenya, with random assignment of subjects into ethnically homogeneous
and heterogeneous groups, he assesses two classes of strategies for managing
diversity: (i) assimilationist strategies, which encourage the construction of
superordinate social identities (e.g., based on a team, religion, or nation) and
(ii) multiculturalist strategies, which entail the construction of shared intergroup beliefs that acknowledge the value of each group’s culture. Results
are mixed. The multicultural prime improves intellective task performance
in ethnically divided groups, but only the assimilation prime improves
prospects for interethnic cooperation. Hoogendoorn and van Praag (2012)
also consider the nonmonotonic effects of diversity using a field experiment
with 550 business students who were asked to create real companies as
part of their curriculum. The authors experimentally manipulate ethnic
composition of student teams and find that a threshold level of diversity
is needed before any gains from heterogeneity are detectable in sales and
profits.
Jha (2007, 2013) considers the effect of economic complementarities across
ethnic groups, or, ethnic complementarities, on prospects for ethnic tolerance
and peaceful coexistence in plural societies. He argues that if intergroup
complementarities are nonreplicable and there exist nonviolent mechanisms for distributing the gains from trade, ethnic complementarities can
encourage peaceful coexistence by enhancing the gains from interethnic
cooperation and, hence, the costs of violence. These predictions are borne out
in a dataset of Indian riots at the town-level between 1850 and 1950, which
indicates that Hindu–Muslim violence was five times less severe in Indian
localities where Hindu and Muslim groups had in early eras performed
complementary economic functions. Building on Jha (2013), Jeon (2014b)
uses a game-theoretic model of decentralized intergroup cooperation to
show that ethnic complementarities create strong incentives for groups to
construct effective cooperative institutions to support interethnic exchange
and realize the gains from complementarity. These studies suggest that one
strategy for minimizing the costs and maximizing the benefits of diversity
is to encourage ethnic specialization and trade. A positive externality of this
approach may be increased economic efficiency following the principle of
comparative advantage, although as we pointed out earlier, the evidence for
this remains inconclusive.

Exploring Opportunities in Cultural Diversity

9

MOVING FORWARD
Social science research on cultural diversity has made substantial progress
toward improving our understanding of diversity’s social costs and
economic benefits. However, as with most good research programs, by
highlighting new patterns in human behavior, this research has generated
many new questions. Moving forward, we believe there are four unresolved
issues that should and will be the focus of future research.
First, future research will clarify the conditions under which one of the
two opposing forces of diversity dominates. Existing research suggests a linear increase in benefits as societies move from ethnic polarization to fractionalization (Ager & Bruckner, 2011). This finding is partially at odds with
alternative theories of diversity that predict an inverse-U-shaped relationship between fractionalization and performance (e.g., Ashraf & Galor, 2013;
Lazear, 1999). Future work will require an iterative process of theory building
and empirical testing to shed light on the social, political, economic, and institutional characteristics that distinguish cases in which diversity leads to productivity gains from the cases in which diversity leads to underperformance.
Second, future research will need to fill the conceptual gap in our understanding of the relationship between the types of functional diversities (e.g.,
skill and cognitive diversity) that are hypothesized to enhance group performance at knowledge-intensive activities, and the types of social diversities
(e.g., ethnic, linguistic, birthplace) that become the basis for identity, and,
often, fractionalization. Although there are good reasons to believe there is
a correlation between functional and social diversity—such that individuals from a variety of different ethnic, cultural, and religious backgrounds
would be more likely to exhibit the types of functional diversities important
for group performance (Alesina, Harnoss, & Rapoport, 2013; Hong & Page,
2001; Page, 2007; Thomas & Ely, 1996)—rigorous empirical analyses for how
these functional differences develop in the first place, or which dimensions
of diversity are most beneficial, are lacking.
Third, there is a need to look beyond economic outcomes to properly
assess the full benefits of cultural diversity. In theory, gains from diversity in
the form of improved problem-solving, innovation-generation, prediction,
and decision-making capabilities can shape a range of outcomes of interest.
Diverse governments, for example, may be better than homogenous governments at designing effective public policies, dealing with political crises,
and stimulating the economy. Heterogeneous communities may be more
robust and superior at finding innovative solutions to local problems, such
as insecurity and the risk of natural disasters. If gains from diversity are
acknowledged across social divisions, it may also generate incentives for
societies to create stronger cooperative institutions in both the public and

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

private spheres to support valuable intergroup exchange, for instance, in the
form of legal protections for minorities and resources to acquire the tools for
success in the host society. These are speculations, but they are not inconsistent with the implications of existing theory (Page, 2007/2011). Further
investigation may reveal that the gains from diversity are far reaching.
Fourth, and perhaps most importantly, research will need to exploit the
power of experimental methods to identify viable strategies for reducing
discriminatory behavior and realizing the gains from diversity. Social psychologists have long employed laboratory experiments to reveal the mechanisms driving racial prejudice and identify promising prejudice-reduction
strategies (see Paluck & Green, 2009 for a review). However, the next step
for the literature is to move out of the laboratory and into the field, where
interventions can be tested using real-world outcomes and with groups with
varying degrees of past cooperation and conflict. This research should also
begin to catalog the numerous approaches and interventions that exist and
estimate their cost-effectiveness with the purposes of identifying the most
viable strategies for promoting peace, cooperation, and economic productivity in plural societies. Owing to the empirical difficulties with separating
correlations and disentangling causal effects in observational data, the experimental approach is likely to provide analytical leverage not available from
other research methods.
We believe that the resolution of these issues will have practical importance
in our world of economic and cultural integration, where groups, neighborhoods, villages, cities, and countries are becoming increasingly more diverse.
Owing to the high costs of reversing the technological advances that permit cultural mixing, and the unacceptable costs of eliminating diversity from
within our borders, there is a necessity for developing effective strategies for
managing multicultural societies. Ideally, these strategies will not only be
effective in reducing the social costs of cultural diversity but also in helping societies take advantage of the potential benefits of increasing cultural
diversity within their borders.
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Alesina, A., Baqir, R., & Easterly, W. (1999). Public goods and ethnic divisions. Quarterly Journal of Economics, 114, 1243–1284. doi:10.1162/003355399556269

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Alesina, A., Devleeschauwer, A., Easterly, W., Kurlat, S., & Wacziarg, R. (2003). Fractionalization. Journal of Economic Growth, 8, 155–194. doi:10.2139/ssrn.319762
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FURTHER READING
Alesina, A., & La Ferrara, E. (2005). Ethnic diversity and economic performance (pp.
762–800). XLIII: Journal of Economic Literature. doi:10.1257/002205105774431243
Hong, L., & Page, S. E. (2001). Problem solving by heterogeneous agents. Journal of
Economic Theory, 97, 123–163. doi:10.1006/jeth.2000.2709
Page, S. E. (2007). The difference: How the power of diversity creates better groups, firms,
schools, and societies. Princeton, NJ: Princeton University Press.
Swann, W. B., Polzer, J. T., Seyle, D. C., & Ko, S. J. (2004). Finding value in diversity: Verification of personal and social self-views in diverse groups. Academy of
Management Review, 29, 9–27. doi:10.5465/AMR.2004.11851702
Williams, K. Y., & O’Reilly, C. A. (1998). Demography and diversity in organizations:
A review of 40 years of research. In B. M. Staw & L. L. Cummings (Eds.), Research
on organizational behavior (pp. 2077–2140). Greenwich, CT: JAI Press.

DAVID D. LAITIN SHORT BIOGRAPHY
David D. Laitin is the James T. Watkins IV and Elise V. Watkins Professor of
Political Science at Stanford University. He received his BA from Swarthmore
College and then served as a Peace Corps volunteer in Somalia and Grenada.
He received his PhD in political science from UC Berkeley. As a student of
comparative politics, he has conducted field research in Somalia, Yorubaland
(Nigeria), Catalonia (Spain), Estonia, and France focusing on issues of language and religion, and how these cultural phenomena link nation to state.
His books include Politics, Language, and Thought: The Somali Experience;
Hegemony and Culture: Politics and Religious Change among the Yoruba;
Language Repertoires and State Construction in Africa; Identity in Formation: The Russian-Speaking Populations in the Near Abroad; and Nations,
States and Violence. In collaboration with James Fearon, he has published

Exploring Opportunities in Cultural Diversity

15

papers on ethnicity, ethnic cooperation, the sources of civil war, and on policies that work to settle civil wars. He has collaborated with Alan Krueger and
Eli Berman on international terrorism. Laitin has been a recipient of fellowships from the Howard Foundation, the Rockefeller Foundation, the Guggenheim Foundation, and the Russell Sage Foundation, and has received several
grants from the NSF. He is an elected member of the American Academy of
Arts and Sciences and the National Academy of Sciences.2
SANGICK JEON SHORT BIOGRAPHY
Sangick Jeon is a Co-Founder at Groundtruth.io. His research explores
public policies, interventions, and social innovations that can resolve pressing global problems, like the persistence of poverty and violence. Sangick’s
work has been published in scientific journals, covered by media outlets,
and supported by numerous grants and fellowships, including those from
the National Science Foundation, the Russell Sage Foundation, and the
Stanford Graduate School of Business. He received his Ph.D. from Stanford
University.3
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2. Corresponding Author: Department of Political Science, Stanford University, 616 Serra St, Encina Hall
West, Room 100, Stanford, CA 94305. E-mail: dlaitin@stanford.edu.
3. Groundtruth.io, 2582 Great Highway, San Francisco, CA 94116. Email: sunny@groundtruth.io.

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Exploring Opportunities in Cultural Diversity

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