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Within-Group Heterogeneity in a Multi-Ethnic Society

Artiles, Miriam (2023): Within-Group Heterogeneity in a Multi-Ethnic Society.

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Is ethnic diversity good or bad for economic development? Most studies find corrosive effects. I document that ethnic diversity need not spell poor development outcomes—a history of within-group heterogeneity can turn ethnic diversity into an advantage for development. I collect data from a natural experiment of Peru’s history: the forced resettlement of native populations in the 16th century. This intervention forced together various ethnic groups into new jurisdictions. Where colonial officials concentrated populations with a history of within-group heterogeneity, who settled in complementary climates of the Andes before colonization, ethnic diversity results in lower costs and may even become advantageous.

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