THE IMPACT OF ETHNOLINGUISTIC DIVERSITY ON ENTREPRENEURIAL ACTIVITY: A CROSS-COUNTRY STUDY

The relationship between language diversity, ethnic fractionalization, and economic activity is both complex and open to heated debate. In this study, we empirically examine the impact linguistic diversity and ethnolinguistic fractionalization has upon entrepreneurial behavior at the country level of analysis. Utilizing an economic club theory approach to social capital, this study supplements the growing socio-economic literature that examines the relationship between diversity and economic growth. We find that while ethnolinguistic diversity is associated with higher levels of entrepreneurial activity, diversity is also associated with higher failure rates. We also find that income disparity is closely related to entrepreneurial activity