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Course outline
"Economics of Diversity”
Shlomo Weber
Milan, June 2012
The purpose of this course is to examine the government policies that aim at preventing conflicts within, and between,
different regions of a country with heterogeneous population. There are several sources of population heterogeneity that
may cause dissatisfaction of significant groups of the society with the one-size-fits-all choices made by the central or
regional governments:
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One is country's typically complicated geographic structure and the associated intricate distribution of its
population, with which the formation of regions, or semi-autonomous entities based on territorial continuity, is
ultimately linked.
Another source of heterogeneity is the population's polarized attitudes (often determined to a degree by
geographical location) towards outstanding political issues, related to government policy choices, such as
protection of minority rights, promotion and preservation of distinctive local culture and language,
disagreement over spending policies, etc.
The important facet of population heterogeneity is the country cultural, linguistic, ethnical, religious and
linguistic fractionalization within the country, that on many occasions leads to tensions, conflicts, and wars.
And yet another source is the income inequality among individuals and regional disparity across regions
comprising the country, which increases awareness and sensitivity to regional redistribution policies of the
central government.
With sufficient heterogeneity and diversity of the country's population, government's inability to satisfy all the
preferences in the country is bound to breed dissatisfaction within a certain group, region or a social class, thereby
creating a potential for internal conflicts. These conflicts can take many forms. A civil war is the most extreme of all,
and it may be the outcome when the dissatisfied group doesn't have well-defined geographical boundaries but
represents, e.g., a social class. In other cases, the group is a region, with relative homogeneity within. Then the conflict
may simply result in rise of separatist tendencies and threat of secession of this region from the country.
Whatever form the conflict takes, its consequences (political instability, inadequate economic performance, etc.) are
often undesirable from the countrywide perspective. The natural challenge is to examine the set of policy instruments
available to the government in order to mitigate these adverse effects of population heterogeneity. Since changing
population political preferences is not an easy option (and certainly neither is changing geographical facts), what
remains consists of fiscal measures and cultural policies. The government can try to make dissatisfied group better off
by transferring back to them some of the tax revenue, thus providing a boost to the economically disadvantaged or
politically dissatisfied groups. In a multilingual country, the government may attempt to implement linguistic policies in
order to prevent the alienation and disenfranchisement of significant groups of citizens within the society.
Dealing with diversity requires a comprehensive approach that in the same time could be applied to the analysis of
specific aspects of diversity: wealth, geography, preferences, ethnicity, and languages, among others. In this short
course chapter we will deal both with empirical and theoretical issue, and, more specifically, will cover the following
topics:
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Theoretical underpinnings of diversity, its general definition and typology. (2 hours)
The measurement of diversity in a general setting and various contexts: diversity indices (4 hours).
Economic applications of linguistic and ethnic diversity (4 hours).
Economic applications of other types of diversity: genetic, and geographic (2 hours).
Some of the material will be based on V. Ginsburgh and S. Weber « How Many Languages Do We Need: Economics of
Linguistic Diversity», Princeton University Press, 2012.
GRADING. There will be a written exam at the end of the course.